[fa icon="calendar'] May 12, 2017 @ 02:49 PM / by Morgan Grenier

Wall of International Currency at AIRINC's Headquarters in Cambridge, MA. Currency credit to AIRINC's international cost of living survey team.

Exchange Rates

The anticipation is over! Here are summaries of the recent exchange rate changes of more than 3.5%:

Appreciations over 3.5%: Ghana, Mexico, and Mozambique 

The largest gain in value over the past month has been the Ghanian Cedi, which has increased 8.08% in value against the US Dollar. This appreciation is credited to the economic management changes made by the new administration: interventions into agricultural policy, reducing or removing some taxes, taking steps to renegotiate the country’s two billion dollar debt and seeking ways to reduce government spending.

Bouncing back from a period of rapid depreciation in 2016, the Mexican peso has had strong recovery in the first quarter of 2017 after almost reaching 22 MXN to 1 USD in January. The monthly rate change was an increase of 4.46%. Recovery has been made possible by monetary policies, such as the Central Bank of Mexico raising its interest rate twice, and softened rhetoric from the US.

Like Mexico, Mozambique faced a period of depreciation in 2016 and in a similar comeback, the Mozambique Metical has gained 4.43% over the past month. After reaching highs near 80 MZN to 1 USD in September, the movement of the metical changed course, beginning a period of appreciation that has continued to the present. This turnaround can be attributed to effects of a series of interest rate increases in 2016, fuel sector reforms, fiscal consolidation and some easement of import demands.

Depreciations Over 3.5%: South Sudan, Tajikistan, Uzbekistan, and South Africa

For losses of value, the South Sudanese Pound dwarfs all other changes in the past month, depreciating 34.65% to the US Dollar. In December 2015, South Sudan made the decision to float their currency, abandoning their peg to the US dollar. No official rate has been set since as the currency continues its freefall. With an ongoing civil war and an import-heavy economy, the depreciation has been accompanied by unbridled inflation. Many government employees have not been paid for months, further restricting the money available to move through the economy.

The Tajikistani Somoni fell 5.62% in value this past month against the US Dollar. From April 12-13, the Somoni reached an all-time high of 8.81 TJS to the USD. While most of the Central Asian countries under the umbrella of the Eurasian Development Bank are experiencing increased stability and projecting reduced inflation, Tajikistan’s accelerated inflation and bad debts temper most positivity. Depreciation can be attributed to liquidity shortages in the banking industry, reduced growth, sharp increases to money supply in circulation and economic struggles in Russia. In 2016, Tajikistan’s finance ministry predicted that the rate for 2017 would average 9.06 TJS to 1 USD.

Despite strong GDP growth, Uzbekistan is facing a steady slide of its currency’s value, and in the last month has dropped 5.22% against the US Dollar. The Central Bank of Uzbekistan sets the official rate every Tuesday, and has been allowing it to depreciate gradually for years, but this rate of change has become steeper in 2017. The official rate remains far below the black market rate. As the rate of depreciation increased, the black market has responded in kind, accelerating to over 7,500 UZS to 1 USD.

In response to the ouster of Finance Minister Pravin Gordhan and a group of other ministers on March 30th, the South African Rand (and currencies pegged to it) depreciated overnight. The monthly change shows a drop of 3.57% of value against the dollar this month. Reactionary exchange rate fluctuations have punctuated the relative gains seen in the last year, with a period of depreciation after the passing of Brexit in the UK, and appreciation after the election of Donald Trump in the US. Since the firing of Gordhan, Standard & Poor, Fitch, and Moody’s have all downgraded South Africa’s debt or put their credit rating under review. The Namib Dollar and Swazi Lilangeni are both pegged to the rand.

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Topics: Currency Volatility, foreign currencies, Currency Devaluations, exchange rates, Data and Infographics