May currency review

As oil prices continued to rebound in May from their extraordinary collapse in March and early April, several oil-dominated currencies also regained significant ground. As our first table shows, big oil producers Colombia, Mexico, Norway and Russia led the way in exchange rate gains during the month.

The South African rand recovered some recent losses too, as it emerged that its main export customer, China, was likely to be the only major economy in the world to record positive GDP growth during 2020.

However, Angola bucked the oil-currency trend, with the kwanza among the world's weakest currencies in May (see next table). Having failed to repair its public finances adequately since the last oil-price collapse in 2014/15, Angola has been hit harder than most by the recent loss of hydrocarbon revenues.

Meanwhile, the Caribbean region is the latest to suffer heavily from coronavirus-related issues. The lack of tourism, greatly-reduced remittances, production and trade, and soaring debt and demand for hard currencies, as people try to protect themselves against an uncertain future, have combined to weaken exchange rates across the island nations. Among the worst hit in May were the currencies of Haiti and Dominican Republic, which had to close their shared border to try to contain the virus, and the Jamaican dollar.

In other currency-related news, Lebanon has launched an economic recovery plan, to include spending cuts, better tax collection, restructuring of banking and energy sectors, and a new flexible currency regime once confidence has been restored. It is in talks with the International Monetary Fund to help fund it. The official exchange rate remains pegged to the US dollar at USD 1 / LBP 1507. However, licensed money changers, who have just reopened after a one-month strike, are offering LBP 4000 to the dollar.

As the value of the Zimbabwe dollar also continues to fall on parallel markets, while the official rate remains fixed at USD 1 / ZWL 25, the central bank is soon to issue higher-value notes. However, there are fears the move could create a licence to print money, with memories of the hyperinflation of a decade ago never far from people's minds. As it is, annual inflation has already reached 766% as of end-April.

A black market for hard currencies is gradually redeveloping in Argentina too, as its government tries to secure a loan-restructuring deal with its creditors and avoid yet another default on its foreign debt. The growing divergence between official and parallel exchange rates is proof of central bank support for the peso, which is supposed to float freely - if official rates offered fair value, the black market wouldn't be needed. An over-valued currency is just one of several alarming echoes of a recent difficult past becoming louder here too.

There may not be many expatriates working in North Korea these days, but those there are may recently have witnessed some wild currency swings.

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