October currency review

The Belarusian rouble was by far the world's weakest currency in October, after the country's central bank devalued it by about a quarter early in the month. The move reverses the gains the bank engineered in the rouble's value in July and August last year. While there doesn't appear to be any problem with foreign-exchange reserves, which remain at historically normal levels (despite international sanctions against Belarus for assisting Russia in its war against Ukraine), keeping a currency overvalued makes your exports less competitive. As inflation soared in 2022, hitting a peak of 17.7% in August, the bank lifted the rouble's value to combat rising prices. Inflation has since fallen to 2.0% as of September 2023, and it is that deceleration in the cost of living that has now allowed he bank to devalue the rouble back to what it considers an appropriate level. 

* Open-market rate

Poland's historic recent election, which might just haved saved democracy in the country, was the main reason behind the strength of the zloty in October (see next table). Again, though, the gains simply reversed the losses of September, when it had looked like the governing Law & Justice Party was going to hold onto power.

The Russian rouble, meanwhile, rebounded as the authorities there reintroduced capital controls in an effort to reduce the amount of money fleeing the country. The drive to withdraw capital is based on a bleak long-term outlook for the Russian economy, which is now set on a semi-permanent war footing. As more and more revenues are sunk into military-related production, so less and less is being spent on education, health, infrastructure and public services, worsening Russia's prospects of economic success down the line. 

In other currency-related news, expectations are rising of two big devaluations ahead: in Nigeria and Argentina. Authorities in both countries, despite numerous devaluations and policy changes, have been unable to stem the divergence between official and unofficial exchange rates. The wider the gap becomes, the harder and more expensive it becomes to manage the economy. Argentina's government has effectively re-pegged the benchmark official exchange rate to the dollar, hugely overvaluing it, in an attempt to stabilise inflation ahead of a presidential run-off vote on 19 November. Whoever wins the presidency, a big devaluation of the currency is very likely to follow.

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