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World Currency Observer
World Currency Observer

Exchange Rates: one year high and low

October 1, 2020 (see October 20 update below). Next update: November 4, 2020. Visit Search to look at past issues of World Currency Observer (brochure edition).

Currencies around the world fell against the US$ (i.e., the US$ went up) starting on Monday, September 21, after mixed performances in September prior to this date (mostly flat, but some currencies up and others down). This was the first trading day after a strong performance by U.S. stock markets on Friday, September 18, partly based on perceptions that the US economic recovery (if not the health recovery) from the pandemic is turning out to be stronger than expected. Six examples of currencies around the world whose net movement on the month against the US$ involved strengthening up until September 18, and then weakness, are the Brazil real (3.4% net downward movement on the month against the US$), the China yuan (up 1% net movement against the US$ over September), the Japan yen (steady), the Malaysia ringitt (up 1%), the South Africa rand (up 1%) and the Taiwan dollar (up 1.5%). The Canada dollar fell by nearly 2% against the US$ in September. There has been a dramatic appreciation of the Haiti gourde, moving from 120 to 74/1$US over the month of September, rising above its pre-pandemic level of 92, to a value it last saw at the beginning of 2019 (inflation in Haiti is around 25%). The Jamaica dollar rose by 5.5% against the US$ in September. The Suriname dollar fell from nearly 8/1US$ to 14.29 in September, a 75% depreciation (the reset of the exchange rate, to 14.29/1$US on September 22, was announced by the central bank on September 21). Suriname has been on the brink of financial crisis for some months, which has been worsened by the Covid-19 pandemic (more on Suriname in a future issue of WCO). The Euro fell by 1.5% against the US$ in September, and the UK pound fell by 3.5%. The Norway krone fell by nearly 7% in September, and is now down by 3.5% since this time last year against the US$. The Turkey lira fell by 7% against the US$ in September (among the events in Turkey: a 200 basis point rise in policy interest rates in the latter part of September), and the Poland zloty was down by just over 4%. (The Turkey lira is now at around 9 per 1 Euro.) The Russia rouble was down in September by more than 6% against the US$, and is now down by 23% since this time last year. The Belarus rouble was up by 1.5% against the US$ in September. The Mauritania ouguiya was up by 1% against the US$ in September. The Angola kwanza fell by 6.5% against the US$ in September, and is down by 70% since this time last year. The Australia dollar fell by 3% in September against the US$, but is still up by 6% since this time last year. The Thailand baht showed a net downward movement of 2.5% on the month against the US$, and is down by 4% since this time last year. Gold prices fell by 3.5% in September 2020, while silver prices fell by nearly 16% - other metals prices also fell in September. Rice prices in US$ terms fell by 6% in September, but are still up by 16% since this time last year. North America natural gas prices have fallen by 11% since this time last year.

An episode which is causing an uproar (e.g, strong objections by the European Commission, and well-publicised criticisms of the UK government by former UK Prime Ministers) in the road to an agreement-based Brexit withdrawal of the United Kingdom from the European Union (i.e., avoiding a “hard” Brexit) is the announcement by the United Kingdom of draft legislation ((September 9) on the UK Internal Market (among England, North Ireland, Scotland and Wales) which, as the UK itself declared in the draft bill (“regulations under section 42(1) or 43(1) are not to be regarded as unlawful on the grounds of any incompatibility or inconsistency with relevant international or domestic law”), has clauses which violate the Ireland/Northern Ireland Protocol (peace accord), which is an important part of a Withdrawal Agreement reached between the UK and the EU last October. The EU objections relate to two Articles (5 and 10) of the Northern Ireland Accord, and relate to an important goal of the Protocol, which is to maintain a soft border between Ireland and Northern Ireland, in the interest of avoiding any possible return to conflict (which, broadly speaking, was one of the goals for all of Europe of the establishment of the European Community). There is much that can be said about the issues involved, but WCO would like to confine ourselves to briefly noting the Protocol clauses in question. Article 5 deals in part with distinguishing whether goods crossing the Irish Sea (the “frontier” between North Ireland) are intended for consumption in the UK or in the European Union, part of the overall thrust of creating a single regulatory zone for the whole of Ireland (absence of border). One feature of the Northern Ireland border is that incoming goods are assessed as to whether their ultimate destination is the UK or the European Union. Article 10 deals with allowing the UK to provide state aid to agriculture in Northern Ireland in excess of EU limits, which are applicable in Northern Ireland as part of the goal of maintaining a soft border. Also, it should be mentioned that other issues (such as fishing) are still ongoing in the road to final Brexit, but the Irish border issue continues to be, as anticipated, among the most difficult.

WCO has seen some measurements which suggest that the previously anticipated fall in remittance payments (transfers of money back home from workers in foreign countries) to emerging countries, due to the pandemic, is not proving to be as steep as had been previously projected, and that this, along with falling imports due to economic contraction in most countries because of pandemic-induced partial closures of economies, is providing a lift for emerging market currencies. Stimuli to funds available to send home from developed countries include lower interest rates around the world and increases in housing prices (widely anticipated to be reversed over the coming year if the pandemic continues) and also, to a lesser extent (due to the nature of the clientele), increases in stock prices. It should be added that increases in exchange rates for most of these countries are not helpful for economic activity.

October 20, 2020 update

The G-20 has extended the debt payment moratorium for emerging countries by another 6 months, until June 30, 2021 (the G-20 will later decide on a further six month extension), and other lenders are also receiving the same request–one country under stress is Argentina, where a sizeable gap has emerged between the official peso rate and parallel markets peso rate…increased chance of a no-agreement BREXIT of the United Kingdom from the European Union (the “Australia model”), with disagreements on a number of issues, including fisheries…remittance payments from foreign workers to their home countries are increasingly being channeled through banks, as the carrying-cash-home option has been choked off by border closures and reductions in air travel…another consequence of the movement away from cash has been a renewed interest in cryptocurrencies, with many announcements by central banks and financial instrument authorities around the world…Vietnam has been placed on the American list for currency manipulation (Section 301)–US import demand has shifted from China to other countries, such as Vietnam, Taiwan and South Korea…on the purely economic side, rises in house prices around the world continue to buoy consumer expenditures and remittances–one example: South Africa...and in Ethiopia there is a currency conversion, swapping new birr banknotes for old ones (started in mid-September, said to have been largely completed at this time), with one intention (as in such conversions undertaken by any country) being greater control over the parallel foreign exchange market.

 Argentina Dólar oficial and Dólar blue (parallel) 2020

(World Currency Observer will next be updated on November 4, 2020. Visit Search to look at past issues of World Currency Observer (brochure edition). For permission-to-quote enquiries, e-mail World Currency Observer at WCO@briargreen.com.)