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

September 1, 2022 (see September 21 update below). Next update: October 3, 2022. Visit Search to look at past issues of World Currency Observer (brochure edition).

There were increases in interest rates in many countries around the world in August, and more are expected in September, with pressure from upward movements in United States interest rates, which are in reaction to inflation increases. While the United States dollar has been strong against a wide-range of foreign currencies, the percentage increase in the US dollar in the more than 2 ½ years since before the pandemic has been surprisingly low – almost negligible against the currencies of emerging economies (which has moderated balance of payment pressure for emerging countries’ foreign exchange debt, which is still considered to be heavy due to debt which was accumulated to finance support for their economies during the worldwide depths of Covid-19, an example being Sri Lanka) – so there is little relief for the U.S. inflation rate from US$ performance in foreign exchange markets.

The Canada dollar fell by nearly 2.5% against the US$ in August 2022, and the Mexico peso was up by 1%. The Iceland króna was down by more than 3.5%. After a 3% rise in July, the Costa Rica colón was up by a further 3.5% against the US$ in July. The Jamaica dollar was up by 2% in August against the US$, and is up by 1% from its value at this time last year. After a general weakening in July, many South American currencies grew stronger in August 2022 against the US$ (such as a 4.5% upward movement in the Chile peso); exceptions included the Suriname dollar. The Argentina peso is down by over 40% from its value a year ago. The Brazil peso has shown a net downward movement of around 0.5% against the US$ since this time last year. The Euro fell by 2% in August against the US$, and the United Kingdom pound was down by more nearly 1.5% against the Euro. The Switzerland (Swiss) franc has shown zero net movement against the US$ from its value before the pandemic. Among the currencies of the former eastern Europe bloc, the Hungary forint stands out, with a 35% decline against the US$ from its value before the pandemic, with all of that decline occurring since one year ago (Hungary has just reached an arrangement with Russia on tourism and natural gas, against the wishes of the European Union, in the context of measures connected with the invasion of Ukraine). The Turkey lira fell by 1.5% against the US$ in August 2022, and was up against the Euro. The Georgia lari fell by nearly 3% against the US$ in August 2022 (other former USSR currencies showed little net movement over the same period) - the lari has shown no net movement against the US$ since its value before the pandemic. Several African currencies strengthened in August against the US$, among these being the Algeria dinar (up 3.8%) the Zambia kwacha (up 2% against the US$ in August 2022), and the Uganda shilling. The Ghana cedi fell by nearly 18% against the US$ in August 2022. The South Africa rand fell by nearly 3% in its US dollar value in August 2022. After a 3% decline against the US$ in August, the Japan yen is down by 24% from its value a year ago. The Taiwan dollar, in the wake of the visit of the U.S. Speaker (Pelosi) in August (linked, in the minds of many, to concern about a Ukraine-style intervention in a giant of semi-conductor production) eased slightly in August, and is down 1.6% from its pre-pandemic value. The Pakistan rupee moved up more than 7.5% in August 2022, aided by indications of a forthcoming International Monetary Fund financing, and also by news of cancellation of a previously-indicated US$3 billion capital outflow by Saudi Arabia (Pakistan is also suffering the effects of a severe monsoon.) Myanmar devalued the kyat (see below). In Sri Lanka, in the context of US$2.9 billion support from the IMF, it has been indicated, regarding the Sri Lanka rupee, that an element of the program will be "Rebuilding foreign reserves through restoring a market-determined and flexible exchange rate, supported by the comprehensive policy package under the program." World natural gas prices, in both of the mostly separate markets in Europe and North America (linked to some extent by LNG shipments), were up in August 2022, and are more than three times higher in the U.S. than they were before the pandemic (twenty times more in Europe), while world oil prices are up by nearly 50% since then. The Baltic Index (of ocean transportation services) is now well below it pre-pandemic level. Coffee and cotton US$ prices showed double-digit increases in August 2022. Metals prices are generally well below their level a year ago - one exception is zinc. WCO has noticed that the increase in the US$ price of gold since its value before the pandemic is roughly the same as the United States inflation rate over the same period.

The official rate of the Myanmar kyat was raised (weakened) to 2100/1$US effective August 10 from 1500, lowering the gap with the then-market rate of 2600. (The kyat had been at 1850 before the change, and had been devalued from 1780 in April 2022). In addition to increases in international food and energy prices (although Mynamar is a petroleum and natural gas producer), and the impact of Covid-19, Myanmar has also been under military rule, following the coup of February 2021. The central bank also relaxed the requirement for immediate conversion of foreign currency earnings for businesses into kyats at the government rate, from 100% to 65% of foreign exchange, but the conversion requirement remains at 100% for citizens. The change in the official exchange rates is part of other recent interventions in access to cash and bank deposits (especially those introduced in April 2022), which included restrictions in withdrawals from bank accounts, which usually require that an official government “token” be presented at the time of the transaction (the tokens are handed out by banks to customer before they line up for bank withdrawals, and this requirement is in addition to other restrictions). Also to be noted is that, as in other south Asia countries, there is a strong demand for gold by ordinary citizens.

September 21, 2022 update

An addendum to the above WCO beginning-of-September-2022 monthly overview of currency movements: the Hongkong dollar, which has been firmly fixed for many years in a narrow 7.75/7.85 band around 7.8/1$US, has been under downward pressure for some months in 2022, and has been pushing up against 7.85/1$US since the beginning of May, despite the support of what are the usual fundamental factors, including the support of the benchmark Hong Kong monetary authority base rate (linked to the Hongkong interbank interest rate, and always matching the movement of the comparable United States dollar fed funds interest rate) and monetary authority United States dollar holdings, which are massively in excess of HK$ currency and HK$ liquid bank deposits - part of the currency board arrangement in Hongkong. (Currency board arrangements can be characterized as fixed-exchange-rate-plus arrangements - in the case of Hongkong, falling somewhat short of 1:1 backing of each-and-every banking sector money liability, but certainly way more than enough for a thriving export economy like Hongkong, which includes an inflation rate of perhaps 3%, well below the United States inflation rate, as discussed below). The Hongkong dollar showed momentary strength around August 10-15, and then slipped back to 7.85 over the next few days.

The announcements of a 0.75% increase in the European Central Bank rate (September 8), and higher than expected inflation in the United States (0.1% increase in August, announced September 13), are among the news indicating that forthcoming higher world interest rates, currently the key influence on the worldwide pattern of currency movements, are widely expected. Other worldwide increases in interest rates in the first two weeks of September have included Australia, Canada, Denmark (whose currency is fixed against the Euro), Poland, Chile and Armenia. (Russia dropped its key lending rate by 0.5% last week.)

In the world of virtual currencies (bitcoins, etc.), the basic unit is the cryptocurrency, which exists as a blockchain, administered by a virtual currency issuer. Contracts that are based on (denominated in and based on the blockchains of) cryptocurrencies, including financial instruments which are like securities and bills of exchange, are widely referred to as digital tokens. Digital tokens, which have existed for several years, will be taking a further step towards being a permanent part of the financial world at the end of September, when ISO (the International Organization for Standardization, which also administers foreign currency identifiers) moves towards a world where all digital tokens will each have their own ISO identifier. Some digital token identifiers exist already, including those issued pursuant to earlier ISO draft procedures for digital token identifiers. As noted in previous issues of WCO (brochure edition), WCO does not include virtual currencies in our definition of currency, but does monitor developments in the virtual currency sector.

(World Currency Observer will next be updated on October 3, 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.)