In August 2024, the largest contributing factors to changes in exchange rates were interest rates, political tension, limited trade, and relaxing government regulations. The Japanese yen appreciated following an increase in interest rates. After the June 2024 elections, the Mexican peso has continued to depreciate. The South Sudanese pound dropped steeply this month following trade disruption. The Ethiopian birr also faced a large depreciation after the government ended its currency controls and allowed the birr to float.
After months of weakening, the Japanese yen has appreciated against the US dollar. The Bank of Japan (BOJ) faced pressure to increase their interest rates while the economy was stable and ahead of the expected Federal Reserve rate cut. After a monetary policy meeting in July, the BOJ raised the interest rates and immediately saw an appreciation of the yen. The BOJ Governor Kazuo Ueda reported there might be additional rate increases this year, depending on how the latest increase affects the economy.
The Mexican Peso has continued to depreciate as inflation remains high. After the elections in June 2024, the value of the peso plummeted and has not recovered. The currency has further declined following the release of July’s inflation data, which didn’t meet economists’ expectations. There is speculation that the Bank of Mexico will cut interest rates as a result of the slowing economy, which will further weaken the peso.
Many African countries, including South Sudan, are looking to protect their currencies by building their gold reserves. Recently the South Sudanese pound has faced significant depreciation, largely due to the oil pipeline that ruptured in February 2024 caused by the war with Sudan. This issue is exacerbated by poor financial management in the country, leading to people seeing extreme salary delays and a higher cost of goods. Gold is seen as a more stable way to increase reserves since it is such a reliably lucrative pursuit.
Ethiopia has recently faced civil conflict, dwindling foreign reserves, as well as a trade imbalance. While there has been a long history of controlling the value of the Ethiopian birr, that control has proved detrimental and has worsened these issues. In an attempt to alleviate the situation, the country has loosened control over the currency resulting in a steep depreciation. Ethiopian Prime Minister Abiy Ahmed loudly criticized banks for artificially maintaining a stronger exchange rate than the market indicated. The decision to float the currency, allowing the value to be influenced by market forces, is part of a long-term economic reform plan. The private sector is now expected to make bigger contributions to the economy to spur growth in the long term. Additionally, Ethiopia has money coming in from the World Bank which will help restructure debt.
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