Headline for .     The US dollar has been generally stronger since reaching a low at the end of January 2018, with an even stronger upward movement since the beginning of April 2018.     WORLD CURRENCY OBSERVER thanks readers for comments. In any language, on any topic, send them to renaissance@briargreen.com.    
World Currency Observer
World Currency Observer

Exchange Rates: one year high and low

January 2, 2019 (see January 23 update below) Next update: February 5, 2019. Visit Search to look at past issues of World Currency Observer (brochure edition).

Movements in currency values were very important in 2018. With stock markets falling during 2018 in virtually every country around the world (big exceptions were India and Saudi Arabia, where both governments are undertaking expenditure increases and other fiscal measures to boost economic growth), the best move by non-US$ investors would have been to have taken advantage of the 2018 strength of the US dollar against virtually every currency around the world (the big exception was Japan), powered by, it is generally agreed, the continued strength of the US economy (with the policy mix including tax decreases, offset by the impact of the trade war with China). Non-US$-based investors in most countries would have done well by placing their money, at virtually any time in 2018 (although a great time to start would have been April 2018), in any US$ interest-bearing instrument (such as a 10 year US Treasury bond, the supply of which has been increasing substantially because of US fiscal deficits). The combination of, say, 2.5% in US$ yields, plus a minimum of 3% in US$ strength (much more for many countries; see below), would have added up to a respectable return of at least 5% in 2018 for most non-US$ based investors (the big exception: Japan) A further impetus towards the 2018 flight to the US$ was a combination of weakness in the prices of many internationally-traded commodities (such as petroleum, metals and tropical commodities), along with wide international variations of other commodity prices, due to the impact of the trade war (examples: maize, wheat and soya).

December 2018 movements left the Canada dollar down by 9% against the US$ since this time last year, while the Mexico peso moved up sharply in December (almost no net change in 2018 against the US$). The Iceland króna moved up sharply against the US$ in December 2018. A 2% rise in the Jamaica dollar in December against the US$ left the Jamaica dollar down by 3.5% over the whole of 2018. The Haiti gourde was down by 21% over 2018. The Chile peso fell by 4% against the US$ in December, and is now down by more than 13% against the US$ since this time last year - the Brazil peso is down by 17% since this time last year. The Euro rose by a little more than 1% against the US$ in December - the UK pound fell by a little over the month, as a mid-December BREXIT-related weakness in the pound was reversed, and the pound finished 2018 down by around 6% against the US$ than this time last year. The Sweden krona fell by more than 9% against the US$ since this time last year. A 3% downward movement of the Turkey lira in December left it down by 40% against the US$ since this time last year. The Hungary forint fell by 8% over 2018 against the US$. The biggest movement among former-USSR countries in 2018 was, by far, the Russia rouble, which has fallen by more than 20% against the US$ over the year. The South Africa rand fell by 16% in 2018 against the US$, and the Zambia kwanza moved down by a little more than 19%. The Madagascar franc was up by nearly 5% against the US$ in December. The Tunisia dinar fell by 1.5% against the US$ in November, and the dinar is 17% weaker against the US$ than it was at this time last year. The Liberia dollar was down by nearly 33% in 2018 and the Ghana cedi fell by 10% in 2018. The Japan yen moved up by a little more than 3% against the US$ in December, and it finished the year up 2.5% since this time last year. The China yuan fall by nearly 6% over 2018, and the Australia dollar fell by nearly 11% on the year against the US$ (with a 4% decline in December 2018). The Pakistan rupee fell by 4% against the US$ in December, and is down over 26% since this time last year - the India rupee was down by nearly 10% in 2018. Gold prices moved up by 5% in December 2018, leaving them 2% higher than they were a year ago. World cocoa prices moved up by more than 12% in December.

WCO is watching developments in Kosovo (in the former Yugoslavia), which has been using tariffs against Serbia to force Serbia to stop standing in the way of Kosovo asserting its sovereignty by joining various international institutions (Bosnia, which also does not recognize Kosovo, has also been the target of these tariffs). Retaliatory tariffs against the import of goods from Bosnia and Serbia were set at 10% on November 6, then sharply increased to 100% on November 26, and then were broadened, in the middle of last week, to include international branded goods produced in Serbia and Bosnia. WCO is looking at, among other things, how the moves by Kosovo fit in with the terms of the Central European Free Trade Agreement, whose members are Eastern European countries which have not yet become EU members. Kosovo declared independence in 2008, and adopted the Euro as its currency without a formal agreement with the EU (although the EU, along with more than 100 other countries, formally recognizes Kosovo as a country).

January 23, 2019 update

How are markets assessing the impact of a “hard” BREXIT on the United Kingdom economy and, separately, on the European Union? The United Kingdom pound has strengthened against the Euro, moving from around 0.90/1Euro to around 0.88, in the few days around the January 16 BREXIT vote in the United Kingdom House of Commons rejecting the draft agreement with the European Union, which makes the worst-case-scenario of some sort of hard BREXIT pretty much inevitable (although the degree to which EU and UK governments can make other adjustments, without the need for a signed framework document, is not generally understood). Along with the Euro falling against the pound since the vote, the Euro has also weakened slightly against the US$ since the vote, which returns it to the 0.88 Euros/1US$ where it was last fall – it started 2019 at 0.88, then strengthened to 0.87, and since then has weakened to 0.88/1$US since the vote. (The UK pound has, like it has against the Euro, gotten stronger against the US$ in the days around the vote, even touching briefly the US$1.30/1pound level.) One conclusion is that the perceived political turmoil in the United Kingdom (leading to a new PM and/or new government, perhaps) has not (yet?) translated into turmoil in foreign exchange markets.

Among the world’s largest downward movement in currencies in 2018 was the 40% decline in the Turkey lira against the US$ (and a 30% decline against the European Union Euro, with which Turkey is in a customs union). Various remarks by the Turkey president and others, reported in world media, led to a perception that a major reason for the devaluation was a reluctance to raise interest rates in Turkey to a high enough level to address inflation in Turkey. But there is a growing perception that the fall in the lira is leading to an export/visitor/investment boom in Turkey, which will translate into strong economic growth in 2019, a year in which weakness is expected in many other economies around the world.

(World Currency Observer will next be updated on February 5, 2019. Visit Search to look at past issues of World Currency Observer (brochure edition).)