The anticipation is over! Here are summaries of the recent exchange rate changes of more than 4%:
Depreciations Over 4%: Argentina, Congo, Iceland, and Venezuela
The Venezuelan Bolivar Fuerte continues to be the most extreme depreciation in the world. While the official rate for the currency depreciated 66% last month in the transition from the SIMADI rate to the DICOM rate, the depreciation observed in the new rate regime is heavily regulated based on limited currency auctions. The black market rate continued to rise at a higher rate, especially following the political turmoil of the late July elections.
The Congolese Franc has continued to depreciate despite the Central Bank of Congo raising their prime rate in January and June. Demand for hard currency remains high, further fueling depreciation. The government’s limited international reserves limit their ability to ease pressure on the currency.
The Argentine Peso reached record lows this month, attributed to political tensions. In early July, the private banks sold US dollars and the Central Bank cut the interest rate of USD-dominant bonds in attempts to steady the rate.
The Icelandic Krona has experienced some volatility in the time since the elimination of almost all capital controls in March, although as a whole the currency is on a trend of appreciation. Tourism and capital inflows—foreign investment into Icelandic companies—support strength in the currency going forward.
Appreciations over 4%: Madagascar, Canada, and Sweden
Vanilla, coffee and other cash crops have begun their export season in Madagascar, contributing to strengthening of the Malagasy Ariary. Another contributor is the release of a second tranche of funding from the IMF as part of the FEC (La Facilité Élargie de Crédit).
The Swedish Kroner has experienced strengthening this month, although tempered by the conservatism of the Swedish Riksbank, which kept interest rates on hold pointing towards higher-than-projected inflation despite favorable economic indicators.
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