Fluctuating Exchange Rates
Many of January’s exchange rate fluctuations result from interest rate changes during the latter half of 2021. Countries like the Czech Republic and Peru increased interest rates to combat rising inflation and stabilized their currency, which caused them to appreciate. Political environments caused uncertainty especially in Afghanistan where a humanitarian crisis has begun. Here are AIRINC’s summaries of the rate changes above 3.5% taken from our review.
Currencies Losing Value against the USD:
SSP – South Sudanese Pound
The South Sudanese pound continues to depreciate as South Sudan suffers from political instability. The Central Bank of South Sudan stated that there will be an increase for the total auction value to $13 million. About 60% of this sum will be allocated to commercial banks while the remaining portion will go to forex bureaus to stabilize the SSP against the U.S. dollar.
Currencies Gaining Value against the USD:
AFN – Afghanistan Afghani
The current economic situation in Afghanistan is dire, and the population struggles to meet basic humanitarian needs. The UN has pledged to give 20 million USD weekly until March 2022 to support the nation from economic collapse and assist those without basic support.
PEN – Peruvian Sol
The Peruvian sol appreciated to one of its best records in 6 months due to consecutive increases in the interest rate. Political instability had less of an impact and is outweighed by other factors including rising copper prices.
TRY- Turkish Lira
President Erdogan announced his plan of action to stabilize the lira after months of decreasing interest rates. As the currency depreciated, many individuals opted to exchange their liras to foreign currency to prevent a decrease of their purchasing power. To discourage this, the government will compensate Turkish lira holders if the currency continues to depreciate. The announcement of this plan resulted in a rebound of the currency, as the incentive was effective and led many locals to exchange their USD for lira. Other changes of note were an increase in the minimum wage, a boost in private pension fund matching, and policies to protect exporters from exchange rate volatility.
CZK – Czech Koruna
The Czech koruna appreciated due to an expectation of rate hikes in March. Rapid rate hikes, including the most recent hike in December, helped push back against rising inflation over the past year. Increasing domestic demand in the manufacturing sector also reflects the expansion of the domestic economy.
AOA- Angolan Kwanza
Increased credit ratings, stable governance, and the rising price of crude oil and other raw materials have all contributed to the appreciation of the Angolan kwanza. This has been the kwanza’s best gain against the USD since 1999 and it is expected to continue into 2022, although at a slower rate due to rising inflation.
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