June currency review

Following big devaluations of the South Sudanese pound in both April (22%) and May (18%), the central bank allowed the currency to fall another 20% in June. The latest official exchange rate, as of 2 July, was EUR 1 / SSP 390. Low foreign-exchange reserves are forcing authorities to weaken the currency steadily, presumably to bring exchange rates much closer to those on the black market. It is very difficult to find reliable information on black-market rates available in Juba or elsewhere in South Sudan, but those reported a month ago were around EUR 1 / SSP 600, so there seems to be some way to go before rates are unified. Interestingly, though, there is also a small auction system in place for commercial banks and foreign-exchange bureaus to buy hard currencies, and rates produced there have actually appreciated in the last month. The latest auction's average bid, from 1 July, was USD 1 / SSP 346. The equivalent euro rate is EUR 1 / SSP 410, close to the latest official rate. If the auction bids represent fair market value, and there is little reason other than low numbers of bidders to suggest otherwise, then maybe street rates are also appreciating. If so, the central bank's work may now be largely done. 

The Surinam dollar was the world's weakest currency in June following the big devaluation we detailed recently. As suspected, and despite indications to the contrary by the central bank at the time, the currency has effectively been re-fixed to the US dollar at the devalued rate, which has been suspiciously stable at around USD 1 / SRD 470 since the devaluation on 7-9 June. It certainly doesn't appear to be behaving as a free-floating currency would.

Although not in our table above, which details movements of official exchange rates, Lebanon's 'effective' rate (ie, the one most readily applicable for most people in the country) also fell heavily in June. Fairer-value rates available on the black market depreciated from USD 1 / LBP 12900 to LBP 17000 during the month, representing a loss of value of 24%, which in turn reflects the deepening economic and political crisis in the country. 

Lots of currencies gained against the euro in June, many of them partly due to the surge in the US dollar (see below). The strongest was the Seychelles rupee, which has had an extraordinary roller-coaster ride in the last 15 months as the tourist industry was first decimated by Covid-19 travel restrictions and is now steadily recovering.

In other currency-related news, El Salvador will become the world's first country to accept Bitcoin as legal tender. In 90 days from the announcement on 9 June, retailers and others will no longer be able to refuse payment by Bitcoin. The move seems fraught with potential difficulties, not least with Bitcoin's value swinging around wildly - we certainly wouldn't recommend delivering expatriate pay in Bitcoin - but it will be a fascinating one to watch.

Finally, the United States dollar had its strongest month in a long while, gaining 3% against the euro, after the Federal Reserve announced it was likely to raise interest rates in response to rising inflation earlier than it had previously expected. However, any rate hike is unlikely before 2023, and as our selected currency movements table below shows, the dollar remains down against the euro year-on-year by 5%.