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 4, 2023 (see September 20 update below). Next update: October 2, 2023. Visit Search to look at past issues of World Currency Observer (brochure edition).

August 2023 was a month when it seemed that, more than any time in the 3 ½ years since the Covid-19 era began in January 2020, currency movements were, for a larger number of countries, best understood by monitoring interest rate changes (several of these countries are highlighted below). Also, key interest rate developments are coming in September, led by how countries/currencies react to whatever happens to United States and Euro-zone interest rates this month – decisions not to raise rates will have just as much impact (although of a different sort) on currency markets as would interest rates increases.

The Canada dollar fell by 3% in August against the US$. The Iceland krone is up by 8% against the US$ since this time last year. After a 2% decline in the US$ value of the Mexico peso in August, the peso is up by 15% since this time last year. The Dominican Republic peso was up by 1% in August against the US$ (up 7% since this time last year.) The Costa Rica colón is up by nearly 17% against the US$ since this time last year. The Brazil real fell by 4% in August 2023 against the US$ (after a 4% drop in July). After a 5% rise against the US$ in July, the Colombia peso was down by 4% in August 2023. There was a sharp decline in the official rate for the Argentina peso (see below). The Euro, after a 2% downward movement in August 2023, is up by 7% against the US$ since this time last year. The Norway krona was down by 5.5% against the US$ in August, and the Sweden krone was down by 5% (attributed by many commentators to interest rates which have not kept up with the United States and the Euro zone). The Turkey lira was up by 1% in August against the US$, after a mid-month increase in interest rates. The Albania lek fell by by 5% in August against the US$. After a 3.5% interest rate increase in the middle of August 2023 (to 12%; see WCO August 2023), the net downward movement in the Russia rouble in August was around 5.5%, and, after several months of decline, the rouble is down 57% since this time last year. The Belarus rouble is now down by 25% since this time last year against the US$. The Egypt pound was steady against the US$ in August 2023, and is down by more than 60% against the US$ since this time last year. In Africa, a currency with a large downward movement in August 2023, compared to other Africa countries, was the South Africa rand, down by 5.5% against the US$ (down 10.5% since this time last year). The Seychelles rupee was up by 3.5% against the US$ in August 2023. After as 2.5% decline in August against the US$, the Japan yen is now down by 5% since this time last year. The Australia dollar and the New Zealand dollar both fell by more than 4% against the US$ in August 2023. Many other Asian currencies declined by 2-3% against the US$ in August. The Pakistan rupee was down by nearly 6% against the US$ in August. The Sri Lanka rupee, fter a slight downward movement in August 2023 against the US$, is up by 10% since this time last year (after a decline of 6.5% in July and a 5.5% fall in June.) After a 6% rise in (the WCO indicator of) US$ oil prices in August, they are 10% below their level at this time last year. Wheat prices continued their decline in August 2023, and are now below the level they were at prior to the July 18 2023 refusal of Russia to extend the Russia-Ukraine safe exports accord. Maize and soybean prices also declined in August 2023.

In Argentina, there was a mid-month fall in the peso, along with a sharp rise in interest rates, which was generally linked to the August 13 primary elections (a predecessor to the forthcoming October 22 presidential election). The primary elections gave an upset victory to Javier Milei, a candidate who has talked about abolition of the Argentina central bank and abandonment of the peso in favor of the US dollar. The large sudden drop in the official and parallel levels of the Argentina peso (20%) after the elections were accompanied by a large rise in the (Leliq) policy interest rate (up 21% to 118%, compared to an inflation rate of around 115%). On August 23, the International Monetary Fund announced that, even though targets for the existing IMF Argentina program had been missed, that it would disburse around US$7.5 billion (SDR5.5 billion) to Argentina. At the end of August 2023, the Argentina dólar oficial was at 347.5, and the parallel market dólar blue at 720, with other peso quotes in between these two (including the dólar turista, which is close to the parallel rate). In its announcement, the IMF mentioned the impact of drought on Argentina agricultural exports, in addition to insufficient policy adjustment; and currency markets have widely noted that Argentina is the biggest IMF client, with loans of U$44 billion, 1/3 of all IMF loans.

September 20, 2023 update

Talk of moving away from the US dollar as a principal currency has led to a reduction (if only to a small extent so far) in the need for US dollars for bilateral transactions, and there are some indications over the last few months that one result has been a noticeable movement towards the commodity that has been the world’s ultimate store of value throughout history: we refer, of course, to the world’s really “hard” currency, gold. Among those who, recent figures suggest, are making some movements in this direction are the world’s ultimate judges of currency values: central banks. Which makes sense, because why shouldn’t the smaller central banks, many of which have been following the BRICS/China/Russia anti-US dollar talk, and which have concluded that the US dollar is really going to be somewhat less useful than before, go for the ultimate (and, politically, the most widely agreed upon) safe haven: gold. So, to them, it may make sense that even a marginal reduction in the role of the US dollar should be offset by a marginal increase in their reserve holdings of gold, ahead of other currencies. It is interesting to note that the central bank of the world which is ultimately responsible for issuing US dollars (the Fed) has, incidentally, long been the largest holder of gold reserves – and this is not to mention the gold reserves of central banks in many other countries of the world which are located in the United States. Gold may turn out to be more acceptable as a means of settlement than some of the lesser currencies, partly because it is far easier to assess the price of gold around the world (and, for the same reason, gold would be a useful unit of account). So, as one of WCO’s staff said: welcome to 2023, with more wars in more countries than ever, and, perhaps, more gold than ever.

The European Central Bank raised its key interest rate by 0.25% on September 14 and the United States central bank rate-setting meeting today left its key rate unchanged, but also interesting is the rationale for why several other countries lowered their interest rates in the first two weeks of September, despite no notable decline in their current rates of inflation – and what will the consequences be for their currencies? Have these countries given up the fight against inflation (choosing to accept more inflation as a price for avoiding recession), or are they gambling that the inflation momentum is down, not just in their country, but in their trading partners (which are the world’s biggest economies). Capital flows are quick to react to downward movement in interest rates, but they can be offset by interventions in foreign exchange markets. A test of whether the individual decisions by these countries to lower interest rates was appropriate will be the net movement of their currencies - not right now, because they have often intervened to support their currencies, but later in September/early October. WCO will analyze exhange rate movements for this group of countries in our October 2023 issue.

(World Currency Observer will next be updated on October 2, 2023. 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.)