Headline for .     Since the beginning of 2018, despite the Covid-19 pandemic, currencies around the world are generally down against the United States dollar.     
World Currency Observer
World Currency Observer

Exchange Rates: one year high and low

January 4, 2022 (see January 19 update below). Next update: February 2, 2022. Visit Search to look at past issues of World Currency Observer (brochure edition).

The Mexico peso was up by 4.5% in December, and is down by 9% in US$ value since before the pandemic. The other two North America currencies (Canada, Iceland) had almost no net change on the month against the US$. While all European currencies weakened against the US$ in 2021, they are mostly up from their values before the pandemic - the exceptions include Hungary, Poland and Turkey. The Russia rouble fell sharply at the beginning of the pandemic (until mid-March 2020), and then has risen gradually since then, resulting in a net decline of 19% in the two years since before the pandemic. The São Tomé and Príncipe dobra fell by 6% in value against the US$ in December, but is still up by nearly 2% from its pre-pandemic value. The Mozambique kwacha was up by 14% in 2021 in value against the US$, while the Seychelles rupee was up by 38% in 2021 (but with no net change for both currencies from their pre-pandemic US$ values). The Australia dollar gained 2.5% in US$ value in December 2021 - the Taiwan dollar is up by nearly 7.5% from its pre-pandemic value. The Laos kip moved down by 3.5% in December 2021 in US$ value (see below), and the Afghanistan afghani net decline of around 14.5% was after an early-in-the-month decline and then a rebound (see below). The Thailand baht is down by 12% from its US$ value before the pandemic. Looking at commoodity prices In US$ over the year 2021, a year with large rises in the prices of many commodities (including oil, natural gas, coal) the list of commodities where prices dropped the last year or showed near-zero change include: gold and silver, cocoa and rice, and soybeans (small upward movement). Rubber prices moved up in 2021 after a decline in 2020. Many commodity prices, in US$, moved down in the last month of 2021.

Euro and China yuan 2020 and 2021.png

Afghanistan has been facing a humanitarian crisis, including the possibility of famine, which has been made worse (some would say has been caused by) the withdrawal of United States-led financial support, which occurred in the wake of the August 15 Taliban takeover, and it was believed that was likely to be worsened by the onset of winter, whose impact can be more severe in the rural mountainous regions of the country. The US$ value of the Afghanistan currency, the afghani, has been gradually weakening since the takeover, with one result being increases in the prices of imported basic food commodities. But, with the onset of winter, in the early part of December, the afghani seemed to be moving toward what looked like a collapse, moving from 96/1$US at the beginning of the month to a low of 126 on December 14, despite intervention by the central Bank of Afghanistan (Da Afghanistan Bank). In the wake of this, the United States, while maintaining its sanctions on the Taliban government, including the freeze on the US$10 billion in Afganistan government holdings at the Federal Reserve Bank in New York, took a number of steps to ensure a flow of humanitarian aid, targeted towards the Afghanistan people, which it outlined in a wide series of announcement made on December 22. The comprehensive restrictions of financial aid and transactions with the Taliban (and the more rural Haqqani Network) are still in place, but exceptions are to be made for: humanitarian activities (“that are ordinarily incident and necessary to the provision of humanitarian assistance to Afghanistan, or other activities that support basic human needs in Afghanistan”); agricultural commodities, medicine, and medical devices; personal remittances (including those through Afghan depository institutions); selected international organizations, including many multilateral development banks (among those not on this list is the World Bank); and operations in Afghanistan by the United States government on official business. One result is that the afghani finished the month of December at around 104/1$US, down around 8% from the beginning of the month, which is still substantial, but which would have been a lot worse without the moves by the United States.

Afghanistan December 2021.png

A side note to this is that central bank of Afghanistan indications of external exchange rates use, for Iran, the toman rather the rial. In May 2020, the Iranian legislature approved a phased in change of the Iran national currency from the rial to the toman with one new toman to equal 10 rials. The 10 rial (=1 toman) note is the one most commonly used for day-to-day transactions in Iran, while the rial remains the unit of account. The quotation of the toman rather than the rial by another Islamic state is, of course, support for the observation that the phase-out of the rial is underway.

The currency of Laos, the kip, showed the biggest movement over 2021 among southeast Asia currencies, down 20% in 2021, and by over 25% from its value before the pandemic (currently around 11,200/1$US). Much of this fall (16.5% out of the 20%) has been in the last three-and-a-half months, outpacing the fall in the Thai baht, which has also fallen faster than other currencies in the region - the Thai baht is used for many transactions in Laos, as it is the biggest trading partner (Laos also borders China) and is also an outlet to the sea for an inland country with a population of 7.5 million. There is a parallel foreign exchange market in the kip (inflation is under 4%), but actions over the last few years indicate that the central bank is attentive to the gap, and has always moved the official rate to keep the gap at a manageable level (generally less than 15%). Increasing concerns about the growth of Laos public debt have been publicly highlighted by the International Monetary Fund during the last month, but debt pressure has been mounting all year. Debt concerns are linked to the lack of tourism which is shared by other countries in the region, but, for Laos, there is also the Laos share of the debt burden (in the range of $2 billion) of the construction of a major rail line linking south China (Yunnan) and Laos (overcoming many physical barriers) which, despite the longer term benefit of increased tourism from China, in the short-run has put a great deal of pressure on the Laos debt situation. That being said, foreign tourists have just been permitted again (January 1). Laos is also cited as an example of one of many countries which have debt issues with China, but this is, as noted, offset by the future benefits of the launch of a major trade and tourism rail link with south China.

January 19, 2022 update

In Africa, the Pan-African Payment and Settlement System (PAPSS), which includes the provision of wire transfers across Africa countries (paying in the home currency of/in one Africa country, and receiving the foreign currency of/in another Africa country), was formally launched on January 13, 2022. Or, more properly said, a pilot project, which involved the central banks and other government departments of six core West Africa Monetary Zone countries (Nigeria, the Gambia, Sierra Leone, Liberia, Ghana and Guinea) has been extended to include more Africa countries. The stated PAPSS goal of the initiator, Afreximbank, is accelerating international trade, and it is suggested by its proponents that it will be less costly than wire transfer services which are currently provided by banks and other providers, or than the physical carrying of cash from one country to another, where it is converted to the local currency – a figure widely quoted is that the savings could be as high as US$5 billion from lower transfer costs alone.

There is a nice New York Times “obituary” (one of several over the last couple of months) on the end of use of LIBOR benchmark interest rates at the end of 2021. An issue with LIBOR is readily apparent when it is understood that LIBOR is short for London Interbank Offered (interest) Rate, i.e., it is an average of the Offered Rates (the very best rates, so the closest to the cost of funds, for seven types of loans in each of five currencies) to a panel of lenders/bankers as indicated by them, so that, despite every safeguard imaginable, there was always the possibility that its level diverged somewhat, from time to time, from what interest rate was really being offered, and it appears that this became a real problem from time to time (even though outlying interest rate quotes were not used to calculate the average). Also, LIBOR is a private sector rate on one side of the market, as opposed to something analogous to the mid-market rate often used for indications of foreign exchange rates; or to the offered exchange rate for foreign currency posted by central banks who are selling US dollars or other foreign exchange (where the foreign exchange is available); or the exchange rate quoted by central banks for the conversion of foreign exchange amounts indicated in contracts into the domestic currency, or the reverse. (It should also be mentioned that some central banks have stopped quoting official rates altogether, and the exchange rates they announce are those quoted by private sector banks/foreign exchange dealers.) One can remark that, for very large amounts of currencies, the bid and ask rates are very close together, so that the either the bid or the ask rates are very close (although not identical) to the preferred indicator, the mid-market exchange rate (which is the average of the bid and ask exchange rates). LIBOR RIP (after existing contracts have been wound up).

(World Currency Observer will next be updated on February 2, 2022. 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.)