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World Currency Observer
World Currency Observer

Exchange Rates: one year high and low

January 3, 2018 (see January 17 update below). Next update: February 1, 2018. Visit Search to look at past issues of World Currency Observer (brochure edition).

Many currencies around the world strengthened against the U.S. dollar in December. But, one exception was the Mexico peso, which fell by 5.5% in December (but was still up by 4.6% over all of 2017), and another was the Iceland krone (which just completed a sovereign bond issue denominated in Euros)—the krone was down 1.2% in December, but up by more than 8% over 2017. The Jamaica dollar rose by 1% against the US$ in December, and was up by nearly 3.5% over all of 2017. The Haiti gourde was up by 5.5% against the US$ during 2017. South America currencies were generally stronger against the US$ in December, with the big exception being the Argentina peso, which fell by 7.4% in December, and by 19% over the whole of 2017. The Euro was up by more than 12% (!!!) against the US$ in 2017, while the United Kingdom pound was up by nearly 9% in 2017 against the US$ (down against the Euro). The Turkey lira reversed its November decline with a 5% appreciation in December, finishing the year with a 7% decline against the US$ in 2017, and an almost 20% decline against the Euro. (Note that, in 2017, the Turkish economy had one of the strongest rates of growth of any country in the world). The Georgia lari reversed much of its November decline against the US$ with a 6% upward movement in December and a 7.5% increase in 2017. The Russia rouble finished 2017 with a 2% rise in December, leaving it up by nearly 5.5% on the year against the US$. The Ukraine hryvnia fell by over 4% against the US$ in December, and was down by 6.5% in 2017 (down by nearly 12% against the Russia rouble in 2017). The Tajikistan somoni was down by 12% on the year against the US$. The 10% upward move in December by the South Africa rand is being generally attributed to the African National Congress selection of a business-oriented presidential candidate. The South Korea won has become continually stronger over the last few months, a notable standout among world currencies. Currencies with movements similar to the won included the Thailand baht and, to a lesser extent, the Taiwan dollar--after little movement among these three currencies in December, they still moved up in 2017 against the US$, and all of them were ahead of the 4.2% strengthening of the Japan yen in 2017. The Bangladesh taka weakened a little in December, and was down by nearly 5% against the US$ over the whole of 2017.

Among the bellwether commodities, oil prices were up in December, finishing the year up by around 15% on average since the beginning of 2017. Gold prices moved up by 1.2% in December, and were up by nearly 13% in 2017. Metals prices in US dollars were up strongly in 2017. One exception was tin, which was, however, still up slightly in 2017 after a 6.5% drop in December. Among agricultural commodities, price increases for all of 2017 were generally low, and prices fell by 10% or more for cocoa, coffee and sugar. Stock market returns around the world for 2017 were mixed, although the list of countries with above-10% stock market index increases includes the United States (but not Canada or Mexico), Western and Eastern Europe countries (but not the United Kingdom), many of the larger Asian economies (but not China), and several South America countries, including Argentina, Brazil and Chile.

January 17, 2018 update

An important (perhaps the most important) issue affecting the Caspian Sea petrocurrencies (Russia rouble, Iran riyal, Azerbaijan manat, Kazahkstan tenge, and Turkmenistan manat), is the division of rights to oil and other minerals in the Caspian Sea, and this appears to be on the brink of a final resolution nearly 20 years since it first arose with the breakup of the former USSR. When the USSR was intact, the Caspian Sea was, essentially, a Soviet lake, to which Iran was granted rights (the Iran section did not include as much oil and gas as the Soviet part). Since the USSR breakup in the early 1990s, the approach followed by the five countries has been to regard the Caspian Sea as international sea waters, by which each country had rights not by mutual agreements (as for a lake), but according to international law – because of where the oil is in the Caspian Sea, the real dispute is among the 4 former Republics, not with Iran. The agreement will, if ratified, provide greater certainty of resource ownership for each country, making agreements for things like pipelines carrying oil and gas to Europe easier. The Caspian Sea is regarded as the world’s largest inland fresh-water lake.

More petrocurrency developments…the Guyana government is starting to address how it will spend the expected US$20 billion it will receive over the next few years from its new-found and ready-to-ship oil and gas wealth, and appears to be thinking about the establishment of a national airline…the Angola central bank has announced that Angola, a major Africa oil producer, has moved away from a currency peg to a floating exchange rate, over which the National Bank of Angola will exercise control, with the publication of a reference rate (taxa de câmbio de referência), and by intervention in the foreign exchange market (the general expectation is for a sharp fall in the official value of the kwanza, which has so far moved from a pre-floating rate of around 165/1US$ to around 182)…a big topic of discussion in Russia is what will happen if the United States freezes Russian US$ financial assets held in the U.S.

Work is continuing on agreements to lead to accession by Montenegro and Serbia to EU membership. The accession path to EU membership for any country is based on starting talks and, ultimately reaching agreement, on 35 chapters (“opening chapters”, “closing chapters”), each covering areas such as energy, human right and the economy. With regard to currencies, Montenegro adopted the Euro as its currency some years ago unilaterally, without agreement with the EU. Last year, EU officials dealing with the EU enlargement issue suggested that Western Balkan countries (Serbia, Montenegro, Macedonia, Kosovo, Albania, and Bosnia and Herzegovina) should also work towards creating a common market among themselves.

(World Currency Observer will next be updated on February 1, 2018. Visit Search to look at past issues of World Currency Observer (brochure edition).)