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August currency review

The Zambian kwacha made further considerable gains in August, following July's surge. The main driver this time was political, as fears of a contested presidential election mid-month eased when opposition leader, Hakainde Hichilema, won with a landslide and the beaten Edgar Lungu peacefully accepted defeat. Lungu has presided over a corrupt, inefficient government, which has raised the country's debt burden to critical levels while failing to reduce poverty. Hichilema has the chance to secure considerable stabilisation funds from the International Monetary Fund by instituting vital reforms, although he may need to act fast while prices for copper (Zambia's principal export) remain high. 

Countries experiencing largest currency gains in August


Currency code Movement v EUR
2 - 30 Aug 2021 (%)
Seychelles SCR +9 10.6
Uruguay UYU +3 7.3
Zambia ZMW +20 24.6

In what was a remarkably calm month for exchange-rate markets, perhaps the most notable thing about the next table is the absence of South Sudan. For the first month since March 2021, the central bank decided not to devalue the pound and its value barely moved. All in all, during four months of steady devaluation, South Sudan's currency fell from EUR 1 / SSP 216 to EUR 1 / SSP 484, losing 55% of its value. The changes bring official rates closer to both black market rates and those produced recently by a parallel auction system and therefore they may represent fair value. If so, the central bank is unlikely to engineer more big devaluations for the time being, although it hasn't said whether it will allow the pound to float or fix its value to that of the US dollar as it did before.

Countries experiencing largest currency losses in August


Currency code Movement v EUR
2 - 30 Aug 2021 (%)
Iran* IRR -6 43.7
Peru PEN -3 4.0
Venezuela VES -3 2719.5

* Open-market rate

When countries fall into crisis, it can be very difficult to obtain reliable, up-to-date information on cost-of-living factors, and we are always grateful for our close collaboration with clients in such cases, as feedback from their staff on the ground can often help ECA to build a clearer picture. Lebanon is one such crisis-hit place at the moment. There is no doubt that inflation is soaring and shortages of goods and services are worsening. But what of exchange rates? While the official rate remains fixed at USD 1 / LBP 1507 and the bank rate (for account withdrawals) stays at USD 1 / LBP 3900, both ECA's information and feedback from clients confirm that better rates are widely available if you hold cash dollars or a credit card. Cash dollars can legally be exchanged at most commercial banks for LBP 12,000 and at some bureaus de change (including Western Union) for around LBP 17,000. Indeed, dollars can usually be used themselves to pay for things, rather than exchanged, in what is rapidly becoming a dollarised, if chaotic, economy. Furthermore, Visa and Mastercard credit card transaction rates were changed considerably at the end of July to USD 1 / LBP 12,000 from LBP 3900. Caution is needed in such a fluid situation, as rates can change dramatically at a moment's notice. Furthermore, the flow of information won't be helped by a recent Lebanese government ban on media reporting black-market rates. Nevertheless, as always, ECA will do its utmost to stay informed, with a little help from our clients, of course; a big thank-you to all those involved!

In other news, Myanmar has re-fixed the kyat to the US dollar to try to prevent further depreciation, which has been significant since the army retook full control of government in February. A black market is already developing and exchange rates are bound to diverge, especially given the ongoing economic slump in the country, as protests, including labour strikes, continue. 

Venezuela will slash six zeros from the nominal value of the bolivar on 1 October 2021.

A reminder that El Salvador will become the first country in the world to make Bitcoin legal tender on 7 September 2021.

Finally, Argentina could be heading for a sudden devaluation of the peso, possibly in late November or December. The central bank has tightened capital controls in a bid to prevent official and unofficial exchange rates from diverging ahead of elections in early November. However, this will be a costly exercise and may not be sustainable once the vote has been held. Our selected currency movements table below shows how weak the peso has been during the last year.

Selected currency movements (v EUR)
Country Currency code % movement to 30 August 2021 v EUR since: Latest official annual inflation (%)
(1 month)
(3 months)
(6 months)
(12 months)
Argentina ARS 0 0 -5 -23 50.2
Australia AUD 0 -3 -4 0 3.8
Brazil BRL -1 +3 +8 +6 9
Canada CAD -1 -1 +3 +4 3.1
Chile CLP -2 -5 -6 0 4.5
China CNY +1 +2 +3 +7 1
Egypt EGP +1 +3 +3 +2 5.5
India INR +2 +2 +3 0 5.6
Indonesia IDR +1 +3 +2 +2 1.5
Japan JPY +1 +3 0 -3 -0.3
Kenya KES 0 +1 +3 -1 6.4
Korea Republic KRW -1 -1 -1 +2 2.6
Mexico MXN -1 +2 +6 +8 5.8
Nigeria NGN +1 +4 -5 -5 18
Norway NOK +1 -2 +1 +1 3
Philippines PHP +1 -1 0 -2 4
Poland PLN 0 -2 -1 -4 5
Russia RUB 0 +3 +4 +2 6.5
Singapore SGD +1 +1 +1 +2 2.5
South Africa ZAR -1 -4 +4 +11 4.9
Sweden SEK 0 -1 -1 +1 1.4
Switzerland CHF 0 +2 +2 0 0.7
Turkey TRY +2 +5 -9 -11 19
United Kingdom GBP -1 0 +1 +4 2
United States of America USD +1 +3 +3 +1 5.4
Venezuela VES -3 -23 -54 -92 2719.5
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