July 1, 2014 (See July 15 and July 22 updates below. Next update: August 5. Visit Search to look at past issues of World Currency Observer (brochure edition).)
The Euro was basically flat over the month of June against the US$, and up 4.4% on a year ago. The UK pound has risen 10% on the US$ over a year ago; the South Korean won is up more than 11% against the US$ since this month last year. South American currencies were generally up against the US$ in June, with the exception of Argentina (which has indicated it will make debt payments to what it calls the (US-based)“vulture funds” by the end of July, avoiding a “real” default –see the WCO July 24/14 update for more background). The Ghana cedi is down more than 50% against the US$ since this time last year. The Australian dollar rose 1.9% on the month against the US$, and 2.7% since this time last year – the New Zealand dollar was even stronger (very high GDP growth in the first quarter of 2014 in Australia). The South African rand fell 3.8% against the US$ in June (the long, at times very bitter, platinum mine strike in South Africa was settled at the end of June). Oil prices are up more than 10% against the US$ since this time last year, while American natural gas prices were up more than 20%. Underlying world currency movements in June is a sense that United States economic growth is faltering.
There have been some statements suggesting that sanctions against Russia may have some influence on the contractual choice of currencies in which payments are made to GazProm, the state producer and exporter of Russian gas, with movement away from the frequent use of the US dollar for these payments. Such decisions are normally based on financial considerations, such as the rouble/yuan denomination of the recent contract between Russia and China on the sale of Russian natural gas.
In the context of the success by insurrectionists in Iraq during June, there is increased talk by the northern province of Kurdistan that, consistent with its status of relative autonomy with the Iraqi federation (e.g., Kurdistan exports a substantial amount of oil from wells in Kurdistan through Turkey), it may consider issuing its own currency. The market value of the Iraqi dinar is at around 1200 per US$, unchanged for several years (the central bank auction rate is slightly less).
July 15, 2014 update
The US Federal Reserve Board expects (based on its reading of the state of the world at the time of its June 17-18 meetings, the minutes for which were released on July 9) to continue to wind down, month-by-month, its quantitative easing program (large-scale purchases, with Federal Reserve bank money, of US government and government-guaranteed debt), with the last purchases anticipated to occur in October 2014.
A clear sign of the existence of a general nervousness in European financial markets was demonstrated by the reaction (downward movement of European stock markets, and resulting comments by prominent politicians and institutions) to news that Espírito Santo Financial Group SA (the parent of Banco Espírito Santo, one of the largest banks in Portgual) was not able to make a commercial paper redemption on July 8/14 (although these payments will be covered).
July 22, 2014 update
Australia is repealing, effective July 1/2014, its Aus$25/tonne levy on carbon dioxide emissions by the country’s biggest emitters of carbon dioxide (which is not the same as a carbon tax). It is also abolishing the Australian Clean Energy Finance Corporation, which has general responsibilities for encouraging clean energy projects and technologies.
(Next update: August 5, 2014. Visit Search to look at past issues of World Currency Observer (brochure edition).)