Headline for .    Current inflation rates are: United States 1.4%, Euro-area 1.4%, Japan 0.4%, gold -6.5%, silver -14.5%.    WORLD CURRENCY OBSERVER thanks readers for comments. In any language, on any topic, send them to renaissance@briargreen.com.    
World Currency Observer
World Currency Observer

Exchange Rates: one year high and low

July 5, 2017 (see July 19 update below). Next update: August 2, 2017. Visit Search to look at past issues of World Currency Observer (brochure edition).

The Canada dollar and the Mexico peso were both stronger in June against the US dollar than one month before, with the Canada dollar up by 4%, moving sharply below the 1.30/US$ threshold for the first time in nearly a year; the Iceland króna fell by 5% in June against the US$, but is still up more than 16% since this time last year. With the exception of the Nicaragua córdoba, all other not-US$-fixed currencies in the Caribbean and Central America were up against the US$ in June. Both the Argentina peso and Brazil peso fell by around 2% against the US$ in June, and the Colombia peso fell by around 3.5%. The Chile peso is up nearly 2% since this time last year against the US dollar. The Euro moved up by around 1.2% in June against the US$, with the United Kingdom pound up by just under 1%. The Euro is 2.5% stronger against the US$ than this time last year, while the UK pound is 2% lower (which means the UK pound has fallen by around 4.5% against the Euro in the 1 year since the UK BREXIT vote to leave the European Union). East European currencies generally strengthened against the US$ in May. The Poland zloty is up nearly 7% since this time last year against the US$, ahead of all other East Europe currencies. The Turkey lira is nearly 22% weaker against the US$ since this time last year. The Russia rouble was down nearly 5% against the US$ in June, but is still more than 7.5% stronger than a year ago. The Uzbekistan som fell by nearly 3% against the US$ in June, and is 35% weaker than 1 year ago. The market rate for the Qatar riyal fell by more than 2.5% against the US$ (see below); the Iran riyal moved up by more than 2% against the US$ in June, leaving it 19% weaker against the US$ than this time last year. The South Africa rand was down nearly 2.5 % on the month against the US$. The Democratic Republic of Congo franc was down 5% in June, and is down nearly 60% since this time last year. The Ghana cedi fell by 3.5% in June against the US$, and the Liberia dollar was down by around 2% (both currencies are weaker than a year ago). The Sudan and South Sudan currencies are now 150%-200% weaker against the US$ since this time last year (Sudan has moved in the year from around 6.5/US$ to the current level of around 16/US$). The Australia dollar moved up by more than 3% in June against the US$ (to just above 1.30/US$), and is now nearly 3% stronger than a year ago. The Japan yen, South Korea won and Taiwan dollar weakened against the US$ in June. The China yuan appears to have firmly moved, from its March level of 6.9/1US$, to 6.8 at the end of June, 1.5% stronger against the US$. The Mongolia tugrik was up around 2.2% in June, leaving it nearly 19% weaker than a year ago against the US$.

The worldwide ramifications of the diplomatic boycott and border closures imposed on Qatar by a group of key Islamic countries (Saudi Arabia, Egypt, the United Arab Emirates and Bahrain) include a refusal by several multinational banks to have any dealings in the Qatar currency (the riyal), which also covers bank business such as borrowing, lending and foreign currency remittances, on the grounds that these might be viewed by national bank regulators as support for terrorist activities. There are some indications that the countries imposing the boycott were not fully aware that it would have such widespread implications. Qatar has referred the measures to the World Trade Organisation, arguing that the actions constitute a violation of WTO rules, with the other countries responding that WTO rules permit such actions in the event of national security emergencies. The Qatar riyal has been fixed for many years at 3.64/1US$, and the central bank has indicated it has substantial foreign exchange reserves to ensure convertibility back and forth with foreign currencies.

After a number of court appeals that ruled on its legality and narrowed its focus, the United States has imposed its originally proposed travel ban on nationals entering the United States from Iran, Libya, Somalia, Sudan, Syria and Yemen.

The Nordic countries (including Denmark, Finland, Norway and Sweden) generally characterise themselves as having the strongest economic links of any group of countries in the world and, consistent with this, are pushing ahead on energy cooperation, to the extent of considering the establishment of their own carbon price, which would be under the umbrella of the Nordic Council, and would cut across European Union initiatives. Among these countries, Finland uses the Euro, the Denmark krone is fixed against the Euro at 7.44/Euro, the Norway krone is the world’s leading petrocurrency (with a bulging sovereign wealth fund), and the Swedish krona floats – Sweden is a member of the European Union, and has chosen not to adopt the Euro. The Nordic countries have a long history of cooperation in exchange rates, dating back, for example, to the Scandinavian Monetary Union of the 19th century.

There are media reports that Morocco will, sometime soon, move formally to a freely floating currency, as agreed with the International Monetary Fund, and something it has been working towards for several years. At present, the central bank (Bank Al-Maghrib) says that it pegs the dirham to a currency basket of 60% Euros and 40% U.S. dollars, with a fluctuation band of +/- 0.5%. The more recent hesitation to move quickly is said to be strongly linked to a perception that the abrupt free float in Egypt in November 2016 indicates what can happen if the transition happens too quickly. (Egypt has just announced a 50% increase in domestic fuel prices, part of a program to work to reduce its fiscal deficit.)

July 19, 2017 update

After more than 2 years of continual strengthening against the US$, including a very steep increase which began at the end of April 2017, there has recently been a Black Friday-type of significant decline in the price of the virtual currency, Bitcoin. Since the beginning of June, when it peaked at nearly U$3000/1 Bitcoin, the value of Bitcoin has declined sharply, and it is now trading at around 2000US$/1 Bitcoin, a 33% decline in just over a month, although still more than three times higher than one year ago, when it was just above $650 ($673 a year ago). The fall in Bitcoin prices has been matched by other major virtual currencies, such as Ethereum and Litecoin. The world supply of Bitcoins is now around 16.5 million Bitcoins, which, at current prices, translates into a total value (market cap) of around US$34 billion. Although Bitcoin market participants have generally focused on computer protocol factors as explanations for the market drop, a contributing factor to the decline may have been money flowing into US dollar assets, to take advantage of recent rises in short-term US interest rates.

There was a currency market episode at the beginning of July, involving a temporary sharp decline in the US$ value of the Pakistan rupee. On July 5, the Pakistan rupee fell by more than 3% in one day, at one point finishing above 108/1US$. The State Bank of Pakistan (central bank) issued a press release saying the fall was appropriate, to address an emerging imbalance in the current account, and that the drop was in line with fundamentals. But, there were immediate media reports that the Pakistan Minister of Finance was critical of the drop, and, in the next couple of days, the Pakistan rupee went back to its former level of around 105.4/1US$. Later, in published remarks, the Minister spoke favorably of the prompt action of the Bank in stabilising the rupee and defeating speculators.

(World Currency Observer will next be updated on August 2, 2017. Visit Search to look at past issues of World Currency Observer (brochure edition).)