March 2023 was quiet for currency movements compared to previous months. We have few volatile currencies this month that see movement often in previous months. Each country below had different economic factors that affected their respective currency including forecasting, budget deficits, devaluation, and external investment. Additional causes mentioned below, include dollarization, market, and black-market demand.
Currencies Losing Value Against the USD
ARS – Argentine Peso
The Argentine government agreed to lower their IMF net reserve target due to economic outlook. Argentina’s soy production is expected to decrease due to the current drought. Argentina is the world’s top soy exporter, third largest for corn, and has been heavily impacted by rising energy and fertilizer costs. Some areas have been affected by drought since May 2022. The poor forecasts for crop production will make it difficult for the Argentine central bank to rebuild its foreign currency and to cushion the depreciating peso.
SRD – Surinamese Dollar
The depreciation of the SRD continues due to the country’s long-standing budget deficit. Strikes have had no effect on the cost of living or gas prices. The minimum wage increased in February 2023 to help, but anti-government riots and strikes have continued. Suriname had an opportunity to access offshore oil, but the lack of a sign off to invest in the area prevents the country from acquiring the resources.
ZWL – Zimbabwean Dollar
Dollarization and negative expectations for the Zimbabwean currency continue to drag its value down. U.S. dollar usage has risen cumulating to over 75% of transactions in the economy. Inflation remains the primary cause of de-dollarizing, which has been a large obstacle since it gives little incentive for the consumer to use the local currency. Zimbabwe adopted a new method to measure inflation from a weighted basket of goods in both Zim dollars and U.S. dollars; this was previously only calculated in Zim dollars. Last year the government stated that the multi-currency system will remain in place for the next five years.
LBP – Lebanese Pound
To combat the black-market rate, The Banque du Liban increased the Sayrafa rate from approximately 45,000:1 to approximately 70,000:1 with the USD. After the black-market rate’s activity began to increase, the central bank adjusted their rates appropriately to match. Sayrafa transaction limits for individuals and businesses were raised to increase the volume of transactions on official transactions. Rioters attacked at least six banks in protest of these restrictions causing fires in certain areas and blocking roads.
Currencies Gaining Value Against the USD
LKR – Sri Lankan Rupee
Sri Lanka’s debt plan received massive support from China, causing the rupee to rise. With China’s support, the IMF plans to give a $2.9 billion USD bailout that will help spur foreign investment from other financial institutions such as the World Bank and the Asian Development Bank. The currency’s trading band will also be removed, and the currency will start to be driven by market demand. The trading band was a restriction placed by the government to cap the movement of the currency.
