In September 2024, exchange rates were most affected by interest rate changes, natural resource availability, and decreased currency control. The Thai baht and Japanese yen strengthened because the United States lowered its interest rate. Changes to the price and demand of gold have also strengthened the baht. In South Sudan, a ruptured oil pipeline led to a sharp depreciation of the South Sudanese pound. The Ethiopian birr lost value following the government’s decision to loosen control of the currency.
The baht appreciated significantly due to an interest rate cut in the United States and strong demand for gold. The United States Federal Reserve dropped the interest rate by 50 basis points in mid-September. The reduction narrowed the gap between the US and Thai policy rates, therefore strengthening the baht. The price of gold has also contributed to the currency’s appreciation. Although the price of gold has increased, Thailand has experienced a notable surge in gold investment, making it the leader in Asia for gold demand. There is concern that the baht’s rapid appreciation could have a negative impact on exports and tourism.
The Japanese yen has continued to gain value after the Bank of Japan (BOJ) increased the interest rate in July. BOJ Governor Kazuo Ueda faced pressure to increase the interest rate while the economy was stable. Japan saw an immediate appreciation of the yen following the increase in July. In mid-September, the United States Federal Reserve cut their interest rate by 50 basis points. Japan’s interest rate hike paired with the United States’s interest rate cut has further narrowed the gap between the rates, resulting in continued appreciation of the yen. Ueda reported the BOJ might increase the interest rate again this year depending on the state of the economy.
Ethiopia has a long history of controlling the value of the birr, which has worsened issues such as shortages in foreign reserves, trade imbalances, and civil conflict. To improve the situation, the government of Ethiopia decided to loosen control over the currency and allow the market to impact the birr’s value. Following the decision to float the currency against the USD, the Ethiopian birr has significantly devalued. The government of Ethiopia maintains that the floating of the birr was the only feasible solution to their shortage of foreign reserves. Ultimately, the Ethiopian government hopes this decision will expand foreign trade and access to the USD for businesses while also limiting trade to legitimate channels. However, the current value of the birr is creating issues for the general population of Ethiopians. The major devaluation is making it difficult for people to purchase groceries and other necessary goods.
Earlier in 2024, an oil pipeline that South Sudan uses to export most of its crude oil through Sudan ruptured, and repairs have been slow due to the war in Sudan. Since crude oil is South Sudan’s main export, the disruption in the pipeline and trade has caused a steep devaluation of the South Sudanese pound. More recently, the South Sudanese government has been introducing measures intended to strengthen the currency, such as increasing electronic transfers and investing USD in the foreign exchange market. While these changes appear to be having a positive impact on the value of the pound, experts warn that this is a temporary bounce back rather than long-term economic growth.
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