World Currency Observer
Exchange rates around the world

Exchange Rates: one year high and low

September 3, 2014 (See September 16 update below. Visit Search to look at past issues of World Currency Observer (brochure edition).)

The euro is little changed on the US$ since this time last year, and the Japanese yen is 6% lower against the US$ since then. The UK pound is up 7% against the euro since this time last year. In South America, the Brazil real is 6% higher against the US$ than a year ago (Brazil has recently injected liquidity into the banking sector to stimulate more lending), and Uruguay peso is down 7.7% since this time last year. The Turkish lira is down 7% against the US$ since this time last year (Turkey is not fully participating in sanctions against Russia, and will increase its food exports to Russia). The Ukraine hryvnia is down 66% since this time last year, and the Russian rouble is down 10%. The Ghana cedi is down 80% since this time last year. The India rupee is up more than 3% on the month. The Israel shekel is down 4% on the month, but is still nearly 2% higher than a year ago.

There are strong indications that prices of American-produced agricultural commodities (such as cotton, maize, soybeans and wheat), already falling over the last year, will be under even more downward pressure as the end of 2014 approaches, as official forecasts indicate that U.S. harvests will be very strong. Coffee and cocoa prices are up sharply from last year. The unwinding in tropical countries of stockpiles of rice and natural rubber should put downward pressure on their prices. To complete the commodity price picture, oil prices are roughly 10% lower than a year ago.

The Asian Development Bank has issued a comprehensive report which sharply revises upward the number of people in Asia living below the international poverty line, suggesting that the international benchmark of US$1.25 day is too low for Asia, that it should be at least $1.51 day. The poverty line for countries in tropical climates is generally taken to be roughly US$500 per year, which translates to the “headline” poverty line of $1.25/day. Originally, a US$1/day figure was first reached in the late 1980s, by World Bank employees, who looked at what individual lower-income countries were calculating as their poverty-level baskets of goods and services, and then translated these baskets into US dollars at the purchasing power parity levels of exchange rates (the exchange rate which equalizes prices across countries, which is almost never the same as the market exchange rate, but is considered to be the direction to which market exchange rates are heading at any time). The poverty-line figure was later adjusted for inflation from the $1 level to the current benchmark of US$1.25/day.

September 16, 2014 update

The September 4 measures announced by the European Central Bank, squeezing out even lower interest rates on very short-term loans to banks (0.05% and 0.30%, with the deposit facility rate lowered to 0.20%), and the beginning (October 2) of the purchase of European private sector asset-backed securities, have pushed the Euro over the line, so that the six-month-old weakness of the Euro against the US dollar is, at last, translating into a significant depreciation of the Euro. This has also contributed to a perception of strength for the US dollar, as trade-weighted estimates of the external value of the US$ generally have a near-20% weight for the Euro (with an equivalent weight for China, and an additional 10% weight for each of the Japanese yen, Canadian dollar and the Mexican peso.)

 Euro September 15 2014

WCO notes that Ebola currency countries are Guinea (Guinea franc; population 12 million), Liberia (Liberia dollar; 4 million) Sierra Leone (leone; 6 million) and Nigeria (naira; 175 million). Ebola-linked trade disruptions have not, in themselves, affected the levels of each of these currencies.

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