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World Currency Observer
Exchange rates around the world

Exchange Rates: one year high and low

June 3, 2014 (see June 10 and June 24 updates below. Next update: July 1, 2014. Visit Search to look at past issues of World Currency Observer (brochure edition).)

There was a slight weakening on the month for the euro against the US$, and a strengthening of the yen. The China yuan is down by around 2% on the year against the US$. The India rupee, Mexican peso and Russian rouble were up against the US$ by around 2.5% during May. The South African rand was up slightly on the month, and down 5% since this time last year. Eastern European currencies were up against the euro on the month, with the Turkey dinar up 3% against the euro. The Indonesian rupee was down slightly on the month against the US$, and has fallen over 18% on year. The South Korea won is up nearly 10% since last year against the US$. The Jamaica dollar is down 10% against the US$ since last year, but rose a little in May. Rubber prices in US$ terms have fallen nearly 30% since last year; cocoa prices are up 40% on the year.

WCO is assessing the timing and financial impact of the forthcoming abolition of restrictions on currency remittances to North Korea from Japan, part of a May 29 Japan-North Korea agreement, which includes starting a process to account for the whereabouts of all of the Japanese civilians abducted by North Korea in the late 1970s/early 1980s as part of North Korean espionage operations of that era (Kim Jong-Il said that these operations were considered renegade by North Korean authorities). According to North Korea (DPRK), remittances are to resume “from the point of time that DPRK side sets up a "special investigation committee" for the comprehensive survey and starts its deliberations “

A glance at the four Venezuela exchange rates suggests they have stabilised at approximately what they were at the time of the March 24/14 introduction of Sicad 2. Venezuela has three official rates (6.3 bolivars/US$, 10, and the Sicad 2 rate of around 50) and a substantial parallel market (around 70 bolivars/US$)

The deal reached in the last week of May by Argentina with the Paris Club of government creditors concerning US$9.7bn in debt, which has been in default since 2001, puts Argentina much closer to renewed access to world markets for sovereign loans.

In the context of Russia’s announced goal of moving to a floating rouble by 2015 (“the transition to inflation targeting” of monetary policy),the Central Bank of the Russian Federation announced a reduction in the US$ amounts of interventions in its foreign exchange regime. The Bank of Russia focuses on keeping the rouble in a +/- 3.5 rouble band around its own target which is based on how many roubles are required to buy a two-currency basket consisting of $US 0.55 plus Euro 0.45 (the price of this basket was 39.9484 roubles on May 24/14). Within the +/- 3.5 rouble band around the target, intervention starts at +/-2.5 roubles (amounting to US$ 100 million per day as of May 22, down from U$200 million), and intensifies at the outer +/-3.5 roubles band (amounting to US$ 300 million per day as of May 22, down from U$400 million). When cumulative day-to-day net interventions exceed US$1.5 billion (indicating sustained upward or downward pressure on the rouble), revaluation of the target is to be considered.

The treaty signed on May 29/14 creating the Eurasian Economic Union (consisting now of Russia, Belarus and Kazakhstan, with more former-USSR republics likely to join) and the signing of a major natural gas agreement between China and Russia, suggest consequent changes in trade flows among former USSR republics, with implications for exchange rates.

June 10, 2014 update

After a number of months of anticipation, a major package of measures to stimulate the European economy was announced by the European Central Bank (ECB) on June 5, squeezing out even lower interest rates on ECB loans to banks (already almost zero), with negative rates on reserves held by banks at the ECB; and, with more expected impact, providing more ECB loans to banks to stimulate bank lending, one part of which are the “targeted long- term refinancing operations”. The European Central Bank has now done pretty much all that it can for the moment in the way of monetary stimulus, with the exceptions of U.S and U.K.-style direct purchases of government bonds (“quantitative easing”- difficult in Europe with the variety of country fiscal situations), and a broadening of the asset-backed securities market, which would be a way for the ECB to implement a European version of quantitative easing.

June 24, 2014 update

There is high drama this week as Argentina meets, in New York on June 25, with its “holdout creditors” (aka “vulture funds”), in the wake of a US court decision that Argentina must pay them, by June 30, the US$1.5 billion they are owed, before it is allowed to settle with the other creditors who had earlier agreed to a restructuring of Argentine debt. Foreign exchange rate implications for the Argentine peso in the near term arise due to the fact, as Argentina points out, that payment of the $1.5 bn would trigger payment of $15bn in the near future to all holdout creditors, more than 50% of its foreign exchange reserves. Argentina has an official peso/US$ rate at 8.13, and a parallel exchange rate (”blue dollar”) at around 12.4/US$ (up around 50% since this time last year). Behind all of this, the fundamental ratios for Argentina, such as government debt/GDP, are all at internationally respectable ranges.

(Next update: July 1, 2014. Visit Search to look at past issues of World Currency Observer (brochure edition).)

Re the World Cup of football (soccer) finals in Brazil: WCO staff are supporting Belgium and Uruguay in the Group and Round of 16 stages, with their choice of teams to support to be revised, if necessary, for the quarter-finals.