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Exchange rates: September moves

With the process of the United Kingdom leaving the European Union - so-called 'Brexit' - appearing to be in an all-too-predictable mess, it is perhaps surprising that the British pound was the world's strongest currency in September (see first table below).

The reason? Well, it's always hard to be certain about these things, but there's little doubt Brexit was in an even greater mess before. So, it was probably with some relief that investors received news of no fewer than eight u-turns announced by Prime Minister Theresa May in a speech in Florence on 22 September. These major concessions to the EU, which showed a more realistic and less combative approach than previously, unlocked the stalled divorce negotiations and will hopefully allow some progress to finally be made. They also suggested that a 'softer' Brexit was now a much greater possibility, involving an interim period of at least two years following the official leaving date of March 2019, during which not a lot is likely to change.

While businesses and investors welcomed the added clarity and diplomacy, much remains uncertain about how Brexit will ultimately unfold. However, May's speech, by making the interim period all but a certainty (assuming the EU agrees to it) and thereby buying time for people to change their minds should things start to go wrong, also increased the possibility - small though it is as yet - that Brexit might not happen at all. Maybe that was what lifted the pound most of all.

Countries experiencing largest currency gains in September
Country
Currency code Movement v EUR
4 Sep - 2 Oct 2017 (%)
Inflation
(%)
Gibraltar GIP +4 2.2
United Kingdom GBP +4 2.6

The euro was a little weaker this month, as concerns surrounding Catalonia's independence referendum became increasingly justified. However, only the pound gained more than 2% against the single currency in September and many more currencies lost further ground against it, continuing recent trends. The heaviest fallers are shown in the next table.

Countries experiencing largest currency losses in September
Country
Currency code Movement v EUR
4 Sep - 2 Oct 2017 (%)
Inflation
(%)
Lesotho LSL -4 5.0
Namibia NAD -4 5.3
South Africa ZAR -4 4.5
Swaziland SZL -4 6.9
Uzbekistan UZS -92 5.7
Zambia ZMW -6 6.3

Uzbekistan was by far the weakest currency in September, due to a massive devaluation we detailed in a previous post. Note that the currencies of Lesotho, Namibia and Swaziland are all pegged to the South African rand.

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

Selected currency movements (v EUR)
Country Currency code % movement to 2 October 2017 v EUR since: Latest official annual inflation (%)
    4/9/17
(1 month)
3/7/17
(3 months)
3/4/17
(6 months)
3/10/16
(12 months)
 
Argentina ARS 0 -9 -25 -20 23.1
Australia AUD -1 -1 -8 -3 1.9
Brazil BRL 0 +1 -11 -3 2.5
Canada CAD +1 +1 -3 0 1.4
Chile CLP -1 +1 -6 -2 1.9
China CNY -1 -1 -7 -5 1.8
Egypt EGP +1 -1 -7   31.9
India INR -2 -5 -12 -3 6.9
Indonesia IDR 0 -5 -12 -9 3.8
Japan JPY -1 -4 -11 -17 0.5
Kenya KES 0 -3 -11 -7 8.0
Korea Republic KRW -1 -3 -13 -9 2.6
Mexico MXN -1 -4 -7 +2 6.7
Nigeria NGN +1 -13 -27 -19 16.1
Norway NOK -2 +2 -2 -4 1.3
Philippines PHP +1 -4 -12 -11 3.1
Poland PLN -1 -2 -2 0 1.7
Russia RUB +1 -1 -14 +4 3.3
Singapore SGD +1 -2 -7 -5 0.4
South Africa ZAR -4 -7 -11 -3 4.7
Sweden SEK -1 +1 -1 0 2.1
Switzerland CHF 0 -5 -7 -5 0.5
Turkey TRY -3 -4 -8 -25 10.7
United Kingdom GBP +4 0 -3 -2 2.9
United States of America USD +1 -3 -10 -5 1.9
Venezuela VEF +1 -3 -10 -5 274.0
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