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March currency review

Surprises can be fun, of course, but when it comes to serious matters like money, individuals, businesses, global mobility teams and, you'd have thought, governments prefer to be able to plan. Naturally, ECA can always help with global mobility, but for everyone else with interests in Turkey, the government there is making future-proofing very difficult indeed.

In November last year, we reported on the damage being done to Turkey's currency and economy by President Erdogan's unorthodox policy of keeping interest rates low in order to tame inflation. Then, only a month later, we were able to highlight the president's sudden reversion to textbook economics, when he appointed a new central bank governor, Naci Agbal, who immediately raised interest rates, believing (as most economists do) that higher rates are actually what is required to cool price rises. Offering greater interest also attracts investment and boosts currency values (so lowering import costs) and between the new bank boss being installed and mid-March, the Turkish lira gained nearly 20% against the euro.

The trouble was, inflation hadn't yet fallen (it is always a lagging factor following currency gains) and although there were signs it soon would, Erdogan lost patience. On 22nd March he sacked Agbal, installed a new governor, Sahap Kavacioglu (who seems to agree with the president on monetary policy) and, needless to say, the lira plummeted again. Indeed, it was the world's weakest currency during the month (see first table), wiping out recent gains.

Having sacked no fewer than four central bank governors in less than two years, the credibility of Turkey's long-term management of its economy has been seriously damaged and that is bound to produce considerable exchange-rate volatility for the foreseeable future, even if Erdogan were to change course yet again.

It is very difficult for businesses to plan in such circumstances. For global mobility teams, at least, it is easier than for most, because ECA's cost-of-living calculators and data are designed to capture not just currencies' ups or downs but the full interplay between exchange rates and relative inflation in both home and host locations, giving the broadest possible picture of impacts on international assignees' purchasing power and showing how, through consistent application over time, their standards of living may be protected - whatever Erdogan decides!

If you require assistance managing your expatriates' remuneration in Turkey, or anywhere else, do please get in touch.

Countries experiencing largest currency losses in March

Country

Currency code Movement v EUR
1 Mar - 5 Apr 2021 (%)
Inflation
(%)
Haiti HTG -4 18.7
Turkey TRY -6 15.6
Venezuela VES -4 2665.4

With vaccinations now the key to ending the Covid-19 pandemic and enabling economies to rebound, much of Europe's relatively slow and disjointed response in this regard meant the euro lost ground against numerous currencies in March (see next table). 

The world's strongest currency was the Mozambique metical, which made significant gains through a combination of higher interest rates (Turkey take note!), securing foreign aid to help with the coronavirus crisis, and the army's recapture of the town of Palma, which is near huge natural-gas projects, from insurgents.

Countries experiencing largest currency gains in March

Country

Currency code Movement v EUR
1 Mar - 5 Apr 2021 (%)
Inflation
(%)
Angola AOA +5 25.5
Dominican Rep DOP +5 6.2
Jamaica JMD +6 4.6
Mexico MXN +6 3.8
Mozambique MZN +13 5.1
Pakistan PKR +6 8.7
Paraguay PYG +6 2.6
Seychelles SCR +6 8.7
South Africa ZAR +5 2.9

In currency news elsewhere, Venezuela has rolled out new large-denomination banknotes (fairly pointlessly it would seem, given the largely cashless economy now and ongoing hyperinflation).

And things aren't getting much easier in either Syria, where the economy is in dire straits and the Syrian pound hit a new low in March, or Lebanon where, according to this excellent explainer from Foreign Policy, no one really knows the value of the local currency anymore.

Finally, here is this month's selected currency movements table:

Selected currency movements (v EUR)
Country Currency code % movement to 5 April 2021 v EUR since: Latest official annual inflation (%)
    1/3/21
(1 month)
4/1/21
(3 months)
5/10/20
(6 months)
6/4/20
(12 months)
 
Argentina ARS +1 -5 -16 -35 38.5
Australia AUD +1 +3 +6 +14 0.9
Brazil BRL 0 -6 -1 -15 4.6
Canada CAD +4 +5 +5 +4 1
Chile CLP +3 +3 +9 +10 3
China CNY +1 +3 +3 -1 -0.2
Egypt EGP +3 +4 0 -9 4.5
India INR +3 +3 -1 -5 5
Indonesia IDR +1 0 +2 +5 1.4
Japan JPY -1 -3 -5 -10 -0.4
Kenya KES +4 +4 -1 -11 5.8
Korea Republic KRW +3 0 +3 +1 1.1
Mexico MXN +6 +2 +7 +10 3.8
Nigeria NGN +3 +4 0 -10 17.9
Norway NOK +4 +4 +8 +12 3.3
Philippines PHP +3 +3 -1 -4 4.7
Poland PLN -2 -1 -2 0 2.4
Russia RUB +1 +1 +2 -8 5.7
Singapore SGD +2 +2 +1 -2 0.7
South Africa ZAR +5 +4 +11 +15 2.9
Sweden SEK -1 -2 +2 +6 1.4
Switzerland CHF -1 -3 -3 -5 -0.5
Turkey TRY -6 -5 -5 -24 15.6
United Kingdom GBP +2 +5 +6 +3 0.4
United States of America USD +3 +4 0 -9 1.7
Venezuela VES -4 -43 -78 -96 2665.4
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