World Currency Observer
World Currency Observer

Exchange Rates: one year high and low

December 2, 2015 (see December 4 and December 17 updates below.) Next update: January 5, 2016. Visit Search to look at past issues of World Currency Observer (brochure edition).

The market for the value of world currencies against the US$, the Euro and Japan yen during November has been strongly influenced by widespread expectations of the results of three monetary policy decisions: that the US Fed will raise US interest rates slightly on December 3 (tomorrow, which would be ahead of the mid-month meeting of the Open Market Committee); that Europe will expand its money program of quantitative easing on December 3; and that Japan would (as it has just announced) continue with its own quantitative easing program. As these decisions are widely anticipated, they were factored into currency values in November. In November, the Euro was down around 4% on the month against the US$, and the Japan yen was down by a little over 1%. The Canada dollar was down nearly 2% on the month, and is now 17% lower against the US$ than it was a year ago. Caribbean currencies were stronger on the month against the US$. Currencies were generally weaker in South America, with the exception of Brazil, with the real rising by more than 3% against the US$. The Argentine official peso was down nearly 3% on the month (see below). In Eastern Europe, there were downward movements of around 7% against the US$ by a number of currencies, including Poland, Croatia, Albania, Romania, Serbia and Macedonia. The Kazakhstan tenge fell by nearly 13% against the US$ in November. The Syrian pound was down in November by just over 18%. The Zambia kwacha was up by around 20% against the US$ in November, a movement attributed by some to positive reception to a new economic plan presented by President Lungu (but the kwacha is still down by nearly 60% since this time last year). The Uganda shilling was up by 9% against the US$. The Sierra Leone leone was down 12%. The Indonesia rupiah was up over 6% on the month, and is down around 13% since this time last year against the US$. The Australian dollar was steady on the month, but is still down nearly 19% since this time last year – the New Zealand dollar was down 3% on the month. The India rupee was down over 3% against the US$ on the month.

November 2015 was marked by a long list of multi-nation assemblies, still ongoing or just completed, with a mix of discussions and decisions which will impact everywhere in the world. The United Nations Paris Climate Change talks (COP21 or the 21st Conference of Parties) are ongoing, with participation by virtually every country in the world, and are particularly significant this year because of the importance placed on them by all of the richer countries of the world (among the big issues: worldwide deforestation). But besides the Paris Climate Change talks, during November there have been other major multi-nation meetings, including the Asia-Pacific Economic Cooperation meetings in the middle of November, the British Commonwealth Heads of Government Meetings and, of course, the G-20 meetings at the beginning of the month.

The International Monetary Fund has announced that the China yuan will be part of the Special Drawing Right (SDR) basket next year (October 1, 2016). The weights of the SDR currencies will be: 41.73% for the US$, 30.93% for the Euro, 10.92% for the China yuan, 8.33% for the Japan yen, and 8.09% for the UK pound. There were some who linked an early November surge in the yuan (which was reversed after a week or so) to speculative movement ahead of a key decision-date at that time on the inclusion of the yuan in the SDR basket.

China yuan December 2015

In Argentina, Mauricio Macri won the final round of elections on November 22, and will become President on December 10. During his Cambiemos campaign, he indicated that changes will occur with regard to structure of the Argentine peso, with movement towards eventual integration of the official peso and the parallel Blue Dollar peso, possibly beginning with a devaluation of official peso rates to 14/US$ from their current levels of around 9.7.

The province of Alberta (Canada), the location of most of Canada’s massive reserves of oil (and also of substantial amounts of coal), has announced that it will be setting, for all sectors, starting at the beginning of 2017, a carbon price of Cdn$20/tonne (of carbon dioxide emissions). This price will be increased to Cdn$30 in 2018 (one Canadian dollar is around US$0.75).

December 4, 2015 update

Statements by US Fed chair Yellen two days ago suggesting the time is ripe for interest rate increases in the United States were reinforced by news this morning of a strengthening US labour market. In Europe yesterday, the Europe Central Bank (ECB) lowered a key interest rate, but did not expand its quantitative easing program (the purchase of Euro 60 billion in bonds per month). The Euro had moved sharply upward since last week (from around 1.06 US$ per Euro to around 1.09) after the ECB announced its decision yesterday (which surprised many), but now will need time to digest the impact of the news from the United States.

December 17, 2015 update

The United States Federal Reserve made its widely-anticipated move on interest rates on December 16: "Given the economic outlook, and recognizing the time it takes for policy actions to affect future economic outcomes, the [Federal Open Market] Committee decided to raise the target range for the federal funds rate to 1/4 to 1/2 percent [up by ¼ percent]…The Committee expects that economic conditions will evolve in a manner that will warrant only gradual increases in the federal funds rate; the federal funds rate is likely to remain, for some time, below levels that are expected to prevail in the longer run.

Argentina has announced a liberalisation of its foreign exchange regime. Measures announced on December 16 by El Banco Central de la República Argentina include allowing natural and legal persons to “libremente” buy foreign currency (i.e., to sell Argentina pesos) and other foreign assets up to an amount of US$2 million per month. Additional measures announced at the same time will affect new capital inflows into Argentina and foreign exchange transactions connected with Argentine foreign currency liabilities booked in other countries.

(World Currency Observer will next be updated on January 5, 2016. Visit Search to look at past issues of World Currency Observer (brochure edition).)