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January currency review

ECA International

Given the extraordinary times we're living in, global currency markets had a surprisingly relaxed January. Only seven currencies moved by more than 2% either way against the euro, as our first tables show, and only two of them by more than a few percent. 

The big exceptions were the Cuban peso, which underwent a major reform and devaluation (detailed previously and latest here) and, almost inevitably, the Venezuelan bolivar. The latter has appeared in our monthly biggest losers table so often and with such magnitude of losses that it is now almost worthless. Indeed, it has so little value left that the government can no longer afford to print enough bolivar notes to enable meaningful cash purchases, so nearly all bolivar transactions are made using debit cards. Once-outlawed US dollars now circulate freely, although they can be hard to come by at times because of a long and drastic reduction in Venezuelan exports.

Nevertheless, the economy (or what's left of it after seven straight years of recession) is becoming increasingly dollarised and the government in January bowed to the inevitable, allowing bank accounts to be denominated and funded in hard currencies. This may sound like progress for foreign employers needing to pay staff in Venezuela, and it should simplify pay delivery for some, but there is a catch: transactions from such convertible-currency accounts will inevitably be made in bolivars by debit card, so conversion will still need to take place; and with the local currency losing another 39% of its value just in the last month (and 96% in the last year - see last table below), global mobility teams' tasks may not, in reality, be made that much easier. 

Countries experiencing largest currency losses in January

Country

Currency code Movement v EUR
1 Jan - 1 Feb 2021 (%)
Inflation
(%)
Brazil BRL -4 4.3
Chile CLP -3 2.7
Colombia COP -3 1.5
Cuba CUP -96 n/a
Liberia LRD -3 13.9
Venezuela VES -39 1813.1

Authorities in Iran also appear to be running out of options when it comes to maintaining the status quo of their multiple-exchange-rate regime. In January, the budget committee of the Majlis (Tehran's parliament) recommended scrapping the 'official' rate, which has been fixed against the US dollar for years (at USD 1 / IRR 42 000) and unifying all rates according to market value. If the government agrees to the change it would leave the free-floating 'open market' rate (latest USD 1 / IRR 235 000) as the only exchange rate (it is already the only meaningful one as far as expatriate staff are concerned). However, with the economy in a fragile condition and annual inflation already very high (46.2% to end January 2021), it is likely to tread cautiously. 

Countries experiencing largest currency gains in January

Country

Currency code Movement v EUR
1 Jan - 1 Feb 2021 (%)
Inflation
(%)
Madagascar MGA +3 4.5

In other currency news, Syria has launched a new bank note, as it continues to try to rebuild its economy, while in Nigeria, a widely-followed survey by Bloomberg suggested that the official rate of the naira could be devalued by as much as 10% during 2021. We will, as always, continue to monitor the naira and all other currencies round the world, and if you need advice on managing your staff abroad, do please get in touch.

Finally, here is this month's selected-currency movements table:

Selected currency movements (v EUR)
Country Currency code % movement to 1 February 2021 v EUR since: Latest official annual inflation (%)
    1/1/21
(1 month)
2/11/20
(3 months)
3/8/20
(6 months)
3/2/20
(12 months)
 
Argentina ARS -2 -13 -19 -37 36.1
Australia AUD 0 +5 +4 +4 0.7
Brazil BRL -4 +2 -8 -28 4.3
Canada CAD 0 0 +2 -6 0.7
Chile CLP -3 +1 +1 -1 2.7
China CNY +2 0 +5 -2 0.2
Egypt EGP +1 -4 -1 -9 5.4
India INR +1 -2 0 -11 4.6
Indonesia IDR +1 +1 +2 -11 1.7
Japan JPY 0 -4 -2 -6 -1.2
Kenya KES 0 -5 -5 -16 5.6
Korea Republic KRW -2 -2 +4 -3 0.5
Mexico MXN -1 +1 +6 -15 3.3
Nigeria NGN +1 -3 -1 -13 16.3
Norway NOK +1 +6 +3 -2 1.4
Philippines PHP +1 -3 0 -3 3.5
Poland PLN +1 +2 -3 -5 2.4
Russia RUB -2 0 -5 -23 4.9
Singapore SGD 0 -1 +1 -7 -0.1
South Africa ZAR -2 +3 +8 -11 3.2
Sweden SEK -1 +3 +2 +5 0.5
Switzerland CHF 0 -1 0 -1 -0.8
Turkey TRY +2 +9 -8 -26 14.6
United Kingdom GBP +1 +2 +2 -5 0.6
United States of America USD +1 -4 -2 -9 1.4
Venezuela VES -39 -72 -86 -96 1813.1
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