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

December 1, 2021. Next update: December 15, 2021. Visit Search to look at past issues of World Currency Observer (brochure edition).

Looking at various measurements of weighted averages of currencies, they suggest that currencies of the larger economies of the world are generally up against the United States dollar from their values prior to the pandemic, while emerging market currencies are generally weaker against the United States dollar since then. Two examples of this are the movements of the Canada dollar and Mexico peso since their values before the pandemic (but it should be noted that, unlike this case, not all countries fall cleanly into each group). Also to be noted at this point in time: the pandemic continues despite the world economic recovery since the depths of a year-and-a-half ago, and there is no clear agreement whether the higher inflation of the last 2-3 months will turn out to be transitory, or is permanent enough to force a significant rise in worldwide interest rates.

In November 2021, the Mexico peso fell by 4% against the US$ (down by nearly 16% since before the pandemic), and the Canada dollar was down by 3%. The Costa Rica colón rose slightly against the US$ in November. The Paraguay guarani rose by 1.2% against the US$ in November, and is down 5% from its value before the pandemic. The Colombia peso fell by 5.5% in November, and the Chile peso was down by 3.3%. The Euro fell by 2% against the US$ in November. The Sweden krona fell by 5% against the US$ in November. The Norway krone is now down by 2.5% against its US$ value before the pandemic. Aside from the sharp fall in the Turkey lira in November 2021 (see below), other East Europe and Balkan currencies fell in the 2-4% range against the US$ in November 2021. The Russia rouble was down by 6% against the US$ in November; the Georgia tenge rose slightly in November. The South Africa rand fell by nearly 5% in November against the US$, and is now down by nearly 16% since before the pandemic. The Angola kwanza rose by 2% in November against the US$. The Japan yen rose by 3% against the US$ in November, and the Australian dollar fell by nearly 5.5%. The South Korea won rose by 4% against the US$ in November, and is up by 2.5% since its value before the pandemic. After strengthening until the middle of the month against the US$, the Thailand baht fell back, finishing the month down by 1.5% against the US$, and down by nearly 14% from its value before the pandemic. Oil prices fell sharply in November, down around 15% in US$ terms. World wheat prices rose by 4.5% in November, and are up by nearly 45% from their level before the pandemic. As widely noted, the prices of a broad range of commodities are up substantially from their pre-pandemic levels (movements on the order of 20%, 50%, more than 100% for tin and for natural gas prices,). Exceptions include cocoa and rice. Cotton prices are up by 70% from their value before the pandemic.

WCO, noting that the central banks of several countries (most recently, Nigeria, in addition to several Caribbean countries, with more countries to come, such as Tanzania) have launched digital currencies, is thinking about whether the digital currencies will trade 1:1 (at parity) with physical currency and/or bank currency- if not, they may give rise to parallel exchange rates. Digital currencies are issued by central banks, while bitcoins/cryptocurrencies are issued by private firms. Digital currencies receive zero interest from their central bank issuers, so, in this dimension, they do not compete with bank deposits. But the limitations on the amount outstanding of digital currencies, in contrast to the more elastic (dependent on the amount of loans) supplies of bank deposits, combined with issues relating to settlement of buy/sell transactions, may lead to, for example, the naira price of a commodity within Nigeria being more/less than the bank deposit price. On the other hand, this may be of little overall importance in economies that rely almost exclusively on cash, such as Nigeria. Countries that, so far, have found the idea of central bank digital currencies to be of interest include those that rely, to a significant extent, on remittances of currency from citizens working in other countries.

The Turkey lira fell sharply in November 2021, down by around 40% against the US$, to around 13.3/1$US. Late in the month, the Central Bank of the Republic of Turkey issued a statement, indicating that Turkey “implements a floating exchange rate regime and has no commitment to any exchange rate level. Exchange rates are determined by supply and demand conditions according to free market dynamics. Under certain conditions, the Central Bank may only intervene in excessive volatility without aiming any permanent direction. In FX markets, unhealthy price formations are being observed that are unrealistic and completely detached from economic fundamentals. The CBRT deemed it necessary to warn our companies and citizens against possible losses by trading at values completely detached from economic fundamentals under extremely volatile market conditions.” The widespread view is that Turkey interest rate policy has contributed to weakness in the lira, with a cumulative 400 basis point fall in the central bank-administered 1 week repo rate since mid-September 2021, which, besides exchange rate weakness, has been reflected in a 400 basis point rise in market-determined 10 year Turkey bond yields (to around 21%, versus year-over-year inflation of just under 20%) over the same period. Like many other countries, the latest 1 month inflation rate in Turkey has been large compared to previous months.

Turkey lira inflation repo rate Dec 2021.png

(World Currency Observer will next be updated on December 15, 2021. 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.)