World Currency Observer
World Currency Observer

Exchange Rates: one year high and low

February 3, 2016 (see February 17 update below). Next update: March 2, 2016. Visit Search to look at past issues of World Currency Observer (brochure edition).

WCO remarks that January 2016 saw many currencies experiencing sharp downward movements against the US$ in the middle of the month, which were then reversed by the end of January, leaving net movements over the month of January which were often small, despite the middle-of-the month weaknesses. January 2016 was a month with a variety of economic data from around the world adding up to above-average uncertainty with regard to future economic developments, but generally tinged with pessimism. A leading example: questions regarding whether the small December 2015 increase in some key United States short-term interest rates will be followed up with further rises, which was the plan – there is, indeed, some question as to whether the small December rise will be reversed.

The Euro in January 2016 was little changed over the previous month against the US$, and the Japan yen was down 0.7% on the month. The Mexico peso was down nearly 6% on the month, adding up to a nearly 21% decline since the same month last year. The Canada dollar is down nearly 11% against the US$ over the last year. The China yuan is down 1.5% in January and down 5.3% since a year ago against the US$. There were many reports suggesting China continues to be concerned with, and has been taking some actions with regard to, capital outflows and their downward pressure on the yuan. The Thailand baht and Vietnam dong were up more than 1% on the month against the US$.

The United Kingdom pound was down by 4% against the US$ in January, and down by more than 6% against the US over the last year (down around 2% against the Euro since this time last year). The Swiss franc is down nearly 12% against the US$ since a year ago (i.e., since just after the sharp movement of the Swiss franc in January 2015). The Poland zloty was down over 5% in January, and by almost 10% since this time last year. The Belarus ruble, Tajikistan somoni and Ukraine hryvnia were each down by more than 10% on the month against the US$, with the Kazakhstan tenge down by around 9%. The Kyrgyzstan som was stable on the month.

There was a broad range of movements in South American currencies, with Columbia, Brazil and Uruguay all down by nearly 4% in January against the US$, and the recently-floated Argentina peso down by over 7%. The Mexico peso was down by 7% on the month, and is down over 20% since this time last year. The Haiti gourde is down just over 4% in January, and down 28% since this time last year. The Nicaragua córdoba rose over 1% in January against the US$.

The South Africa rand was down around 3% in the month against the US$, and down by 37% since this time last year – a year-over-year movement which is similar in magnitude to downward movements of many other African resource-based currencies. The Eritrea nafka was down by 11% on the month, and Angola kwanza was down by 15% against the US$.

The South Sudan pound was floated in mid-December 2015, at which point it moved from 3.1/US$ to the parallel rate of 18.5. In January 2016, it fell by a further 7% against the US$, to 19.8/US$. The move to abandon the official rate was attributed by the government to declines in oil revenues, attributed to both civil war-related disruptions in oil production and to the drop in the price of oil.

February 17, 2016 update

A very broad range of currencies have strengthened over the past two weeks against the US dollar, such as the Euro and the Japan yen. The China yuan fluttered around the 6.58/US$ level in January and early February, then moved to a steady 6.57 level for about a week-and-a-half, and then jumped (strengthened) to 6.52/US$. (Was some of this trajectory due, in part, to China moving from targeting a basket of currencies to targeting the US dollar?) An interesting observation spreading through financial markets is that, with the world moving increasingly to negative interest rates, zero interest rate commodities, such as gold (whose price has abruptly jumped) are becoming more attractive.

(World Currency Observer will next be updated on March 2, 2016. Visit Search to look at past issues of World Currency Observer (brochure edition).)