Sign in
RSS

September currency review

Bowing to the inevitable, Surinam last week devalued its currency, making the local dollar worth half what it was. The move was not a great surprise, given the speed at which the central bank has been burning through foreign exchange reserves in a desperate effort to maintain the peg to the US dollar. However, citizens of the crisis-hit country were shocked by the immediate hikes in fuel and other prices that were triggered by the currency reform and took to the streets. These events point to real hardship for local nationals in Surinam, especially as inflation is already soaring (see first table below) and will shoot higher yet. For international assignees working in the country, however, rising prices will be offset by the increased value against the local dollar of any hard currency they might be paid in. If you or your expatriate staff are facing difficulties because of changing circumstances in Surinam, or anywhere else, please do get in touch.

Countries experiencing largest currency losses in September
Country
Currency code Movement v EUR
31 Aug - 28 Sep 2020 (%)
Inflation
(%)
Georgia GEL -4 4.8
Iran IRR -16* 30.4
Norway NOK -6 1.7
Poland PLN -4 2.9
Surinam SRD -46 38.2
Venezuela VES -33 2358.5

(* Open-market rate)

The Venezuelan bolivar had another bad month, as did the Iranian rial. The former country's long collapse has been well documented in this blog over many years. Iran's crisis is more recent and fast developing, with many problems beyond authorities' control, according to the central bank. The combination of Covid-19, which is resurgent in Iran, and the collapse of oil revenues because of US sanctions, has seriously damaged the economy and sent the open-market exchange rate into a tailspin. As in Surinam, inflation is already very high and is likely to go higher.

The next major devaluation in the offing could well be Cuba's. Having effectively devalued the peso by removing a conversion charge, as we reported last month, the central bank has been forced to advance plans to unify its dual-exchange-rate regime, vowing to do so by the end of 2020. Assuming it goes ahead, this would mean Cuba's first devaluation since the Castro revolution in 1959.

Zambia has been struggling with unsustainable debts for many months now, but the collapse of copper revenues during the coronavirus pandemic has brought issues to a head. The country's president, Edgar Lungu, much criticised for erratic governance, has asked creditors to accept delays to scheduled debt repayments, while he struggles to agree a deal for emergency funding from the IMF. If the request is granted, it would amount to a default, incurring further credit-rating downgrades and no doubt more depreciation of the kwacha (already down 40% against the euro in the last 12 months). While this would be the first Covid-19 induced default in Africa, others could follow.

The euro had yet another strong month in September, but several currencies managed to gain significant ground against it, as the next table shows. These were mainly market adjustments after recent falls.

Countries experiencing largest currency gains in September
Country
Currency code
Movement v EUR
31 Aug - 28 Sep 2020 (%)
Inflation
(%)
Belarus
BYN
+4
5.7
Haiti
HTG
+7
23.4
Jamaica
JMD
+7
5.7
Myanmar
MMK
+5
4.2
Zimbabwe
ZWL
+4
761.0

In other currency news, Ethiopia has introduced new banknotes, giving holders of the old ones three months to exchange them.

Finally, here is this month's selected currency movements table. It shows, among other things, how weak the Turkish lira has been in the last year and how this has pushed up inflation. Analysts were predicting further losses, but the central bank last week took important steps to bolster exchange rates, by easing curbs on currency trading and raising interest rates. As always, we will monitor how successful these steps are in shoring up the value of the lira.

Selected currency movements (v EUR)
Country Currency code % movement to 28 September 2020 v EUR since: Latest official annual inflation (%)
    31/8/20
(1 month)
29/6/20
(3 months)
30/3/20
(6 months)
30/9/19
(12 months)
 
Argentina ARS 0 -11 -19 -29 40.7
Australia AUD -2 -1 +9 -2 -0.3
Brazil BRL +1 -6 -13 -30 2.4
Canada CAD 0 -2 0 -7 0.1
Chile CLP +2 0 +1 -13 2.4
China CNY +3 0 -1 -2 2.7
Egypt EGP +3 -1 -5 -3 3.4
India INR +1 -2 -3 -10 6.7
Indonesia IDR 0 -9 +3 -11 1.3
Japan JPY +2 -2 -3 -4 0.2
Kenya KES +2 -6 -8 -10 4.4
Korea Republic KRW +3 -1 -2 -4 0.7
Mexico MXN +1 -1 0 -17 4.1
Nigeria NGN +3 -2 -8 -11 13.8
Norway NOK -6 -2 +4 -11 1.7
Philippines PHP +2 -1 0 +1 2.4
Poland PLN -4 -2 0 -4 2.9
Russia RUB -2 -13 -4 -22 3.6
Singapore SGD +1 -3 -1 -6 -0.4
South Africa ZAR 0 -3 -2 -17 3.2
Sweden SEK -3 -1 +3 +1 0.8
Switzerland CHF 0 -2 -2 0 -0.9
Turkey TRY -2 -13 -19 -31 11.8
United Kingdom GBP -2 -1 -2 -3 0.2
United States of America USD +2 -4 -5 -7 1.3
Venezuela VES -33 -50 -83 -95 2358.5
Like this article? Share it... Twitter Facebook   LinkedIn