December 3, 2013 (next update: December 17)

The euro and the yen were down against the US$ on the month, with the euro up against the yen. Eastern European currencies were generally stable or stronger against the euro on the month, although there were exceptions (see below). Former-USSR currencies were mostly up against the Russian rouble, and down slightly against the US$ and the euro. Currencies in the Americas were down for the most part against the US$, more so in South America. The Bangladesh taka is up around 5% over the last year against the US$.

The Ukraine Republic (population: around 50 million), in regard to its difficult and delicate choice between signing the previously-initialled EU Association Agreement (with the European Union), and possible membership in the Eurasian Customs Union (with Russia and other former USSR members), is tilting away from the EU (population: around 500 million) and towards Russia (population: around 150 million). To quote the Ukraine English language press release: “ The Head of State emphasized the necessity of elaborating a coordinated plan of actions aimed at the elimination of contradictions and settlement of problems in trade-economic cooperation with Russia and other members of the Customs Union related to the establishment of a free trade area between Ukraine and the EU. The President reminded that Ukraine and the EU had been going a difficult path of negotiations and search for compromises for 6 years already.”

The agreement between Iran and the United States and other western countries regarding Iran’s nuclear program, as stipulated in the Joint Plan of Action, and interpreted by a widely-quoted (U.S.) White House Fact Sheet, has a number of implications for the Iranian rial and world foreign exchange markets in general over the next six months. These include the suspension of certain sanctions on gold and precious metals, Iran’s auto sector, and Iran’s petrochemical exports, which the Fact Sheet says will potentially provide Iran with approximately $1.5 billion in revenue. Foreign purchases of Iranian oil are allowed to remain at their current levels, 60% less than two years ago (i.e., a pause in efforts to further reduce Iran's crude oil sales). $4.2 billion from these sales will be allowed to be transferred to Iran in installments over the next six months, subject to Iran fulfilling its commitments, while nearly $15 billion of Iranian oil revenues during the six month period will go into restricted overseas accounts. The Fact Sheet says that the vast majority of Iran’s approximately $100 billion in foreign exchange holdings will remain inaccessible or restricted by sanctions. It estimates the total value of all relief-from-sanctions measures at US$7 billion over the next six months.

The Czech National Bank reaffirmed on November 15 (pursuant to the original announcement on November 7) its intention to sell koruna on the foreign exchange market as needed to reach its desired exchange rate level of 27 koruna/euro, with the aim of increasing inflation to its target of 2% (it is currently less than 1%). The Czech National Bank bought foreign exchange worth about 200 billion Czech koruna in its foreign exchange interventions in the period up to November 20. The koruna is now at around 27.4/euro, down around 6% since the beginning of November (equivalent to 20.1/US$, which is around the beginning-of-April level against the US$). WCO notes that Croatia and Hungary have also made policy changes in November, likely to affect the external values of the kuna and the forint.