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

August 2, 2023 (see August 23 update below). Next update: September 4, 2023. Visit Search to look at past issues of World Currency Observer (brochure edition).

The Mexico peso continued to strengthen against the US$, and, after a 2.5% rise against the US$ in July, is up by more than 11% from its value before the Covid-19 pandemic. The Iceland krona was up by nearly 3.5% in July against the US$. The Dominican Republic peso was up by 2% in July against the US$ (up 3% since this time last year). The Brazil real was down by nearly 4% in July 2023 against the US$, and the Colombia peso was up by nearly 5%. The Euro is up against the US$ by 7.5% since this time last year, with a 1% increase in July 2023. The Norway krone was up by 5.5% in July against the US$, the Swiss franc was up 3% and the Sweden krona was up by 2.5% - these movements against the US$ represent increases in currency values against the 1% increase in the US$ value of the Euro in July 2023. The Turkey lira fell by around 3.5% in July against the US$ (there is an enormous amount of worldwide discussion of the change in Turkey interest rate policies over the last month, including a 2.5% increase in the repo rate in the last week of July); the Hungary forint was down by 3.4% against the US$ in July (up nearly 13% against the US$ since this time last year). The Russia rouble was down by 7% in July against the US$, and is down by nearly 50% since this time last year; the Belarus rouble was down by 3% in July 2023. Other former USSR country currencies strengthened in July against the US$. The Syria pound fell by more than 30% against the US$ in July, and is down by 200% since this time last year. The Liberia dollar fell by 4.5% against the US$ in July 2023, and is down nearly 21% since this time last year. The South Africa rand was up by 5.5% in July, and has risen by more than 10% in the last two months. In July 2023, and, in July, the Zambia kwacha gave up most of its June increase against the US$. The Kenya shilling is down by nearly 20% against the US$ since this time last year, and the Tanzania shilling is down by 5.5%. The Zimbabwe dollar moved up sharply against the US$ in July. The South Korean won was up by 3% against the US$ in July 2023, and the Japan yen and the China yuan were up by around 1.5%. The Sri Lanka rupee fell by nearly 4.5% in July. The Laos kip fell by nearly 2% against the US$ in July, and is down by 28% from its US$ value this time last year. The Malaysia ringgit was up by 3% in July against the US$, and is down by nearly 2% since this time last year. Wheat prices moved up in July 2023, but are nowhere near the peak they reached during the early days of the Russia "special operation" in Ukraine. Oil prices were up 10% in July, but are still nearly 25% below their level at this time last year.

World interest rates continued to increase in July, including, in the latter part of the month: increases in short-term United States and Euro policy rates (which forced other rates up); a movement by the Bank of Japan to nudge up long-term Japan government bond yields; and a widely-noted inclination on the part of central banks, implemented in a very subtle way, to reduce their financing of government debt. There is considerable variation across countries in inflation-adjusted (real) interest rates, some of which are very high (and therefore are very attractive to foreign investors), which support exchange rates and also supply much-needed foreign exchange, to finance food and energy imports and foreign-debt interest payments. Also, for most countries, long term yields are lower than short-term interest rates (one of the exceptions is South Africa), indicating a widespread market belief that lower inflation rates are coming.

 Brazil real and Mexico Peso July 2023.png

August 23, 2023 update

After a point when the Russia rouble reached a low of 99/1$US, Russia raised its key policy interest rate last week, on August 15, by 3.5% (to 12%), and there was news of possible capital controls to come (formal and informal). The rouble has strengthened to 93.5/1$US, up nearly 6% since the previous week’s low. (At the beginning of 2023, the rouble was at around 73/1$US, and was at 76 just before the start of the “special operation” in Ukraine in February 2022). There is some talk that the sanctions against Russia have accumulated enough, and that this is the reason for the rouble weakness over the last month which led to last week’s interest rate rise.

One of the characteristics of effective fixed exchange rate regimes (such as Belize, in Central America) that is widely shared among most other countries of the world (and is less required for larger developed countries with large and diversified financial flows) is the meticulous monitoring and management of all inflows and outflows of foreign exchange , i.e., conversion of incoming foreign exchange (e.g. exports, investment, remittances) into the domestic currency, and conversion of outgoing funds into foreign exchange (e.g., imports of food and fuel, foreign debt interest payments). Factors moderating the need for the conversion of foreign exchange into domestic currency include: in fixed exchange rate countries, allowing the US$ to circulate alongside the domestic currency; and allowing the US$ to circulate in competition with the domestic currencies in countries with managed floating systems which tolerate dollarization. In this context, large amounts of foreign exchange reserves (such as those associated with currency boards, or where there is a sufficient quantity of reserves to meet the 3-months-of-imports benchmark) are temporary – much more important is ensuring that foreign exchange inflows from abroad are converted into the domestic currency, preferably through the regulated banking system (with their many links to the central bank) rather than the less-regulated foreign exchange dealer network. Determination of the appropriate exchange rate is also important. There will always be some domestic agent will be willing to pay more than the market rate for foreign exchange, and, due to corruption in some countries, there may be diversion of foreign exchange inflows. But, for the most part, domestic prices for tradeable goods, like food and fuel, compared to the “world” prices, are a strong determinant of the true exchange rate (this is particularly true for the large number of countries of the world with thin domestic capital markets.) In this connection, one of the indicators of appropriate exchange rates for many countries is the domestic currency price of rice versus the world price of rice (which has been rising over the last month, due in part to the July 2023 ban, imposed by India, on the export of non-basmati rice).

(World Currency Observer will next be updated on September 4, 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.)