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September currency review

In August we reported that Myanmar's central bank had re-pegged the kyat to the US dollar, as it desperately tried to stem rapid currency depreciation. In September, however, having spent an alarming volume of foreign exchange reserves to hold the kyat's value, the bank abandoned the peg once more. Unleashed, the kyat immediately returned to its downward spiral (see first table), which accelerated when the 'shadow government' declared war on the military rulers who had grabbed power in February's coup. There has been no official data release on inflation since April, when the annual rate given was 4.0%, but the cost of living is sure to be rising fast. For expatriate staff in Myanmar, higher inflation will at least partly offset the impact of the currency collapse. ECA's September 2021 Cost of Living Survey will be published in November and will reveal a much fuller picture.

Countries experiencing largest currency losses in September

Country

Currency code Movement v EUR
30 Aug - 4 Oct 2021 (%)
Inflation
(%)
Myanmar MMK -12 4.0
Turkey TRY -4 19.6

The central bank of Zimbabwe also appears to be regretting its currency peg to the dollar. As yet it remains in place (at around USD 1 / ZWL 88), but with the bank raising the alarm in September about rapidly diverging black-market exchange rates, a further devaluation of the official rate is surely inevitable soon. Illicit rates now offer a 70% premium. The trouble is that, having gone a long way towards taming annual inflation (latest 50.2%, down from 761% a year ago), authorities worry that a devaluation might send it soaring again. Mind you, rampant depreciation of black-market exchange rates might do that anyway.

Nigeria's authorities are in a similar bind: fighting to support an over-valued official exchange rate while black-market rates diverge significantly and offer fairer value for the naira. Blaming exchange rate divergence on "speculation" rather than poor management of the economy, the government in September banned the publication of unofficial exchange rates. Unfortunately, with a shortage of hard currencies evident, importers can often only access the dollars they need from the black market. Not knowing in advance what rates are likely to be available will make running businesses harder. The move is unlikely to either help the economy, therefore, or stop black-market exchange rates from falling - although it will be difficult to know for sure!

As the next table shows, the Seychelles rupee was the world's strongest currency in September. Indeed, its value, as tourists have returned post-pandemic, has increased overall by at least a third. Although official annual inflation has fallen a little, it remains in double figures, meaning that both cost-of-living factors for international assignees in the Seychelles could be pushing in the same direction - upwards. To what extent will become clearer when ECA's next survey is published.

Countries experiencing largest currency gains in September

Country

Currency code Movement v EUR
30 Aug - 4 Oct 2021 (%)
Inflation
(%)
Angola AOA +7 29.7
Jamaica JMD +5 5.4
Seychelles SCR +9 10.5

In other currency news, Venezuela on 1 October carried out its latest bolivar "surgery" - cutting six zeros from the nominal currency value. The bolivar has become so devalued that the number required even to buy basic goods makes calculations difficult and purchases with cash virtually impossible. With the economy increasingly dollarised, despite the lack of dollars available, the government hopes that the relaunched 'digital bolivar' will increase use of the local currency. While a new ISO code (VED) has been issued, it is only for use domestically to ease the transition. VES will remain the internationally applicable code.

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

Selected currency movements (v EUR)
Country Currency code % movement to 4 October 2021 v EUR since: Latest official annual inflation (%)
    30/8/21
(1 month)
5/7/21
(3 months)
5/4/21
(6 months)
5/10/20
(12 months)
 
Argentina ARS 0 -1 -6 -22 51.4
Australia AUD +1 -1 -3 +2 3.8
Brazil BRL -2 -5 +7 +5 9
Canada CAD +1 0 +1 +6 4.1
Chile CLP -1 -7 -10 -1 4.8
China CNY +2 +3 +3 +6 0.8
Egypt EGP +1 +2 +2 +1 5.7
India INR +1 +3 +1 0 5.3
Indonesia IDR +2 +4 +3 +5 1.6
Japan JPY +1 +2 +1 -4 -0.4
Kenya KES +1 0 0 -1 6.6
Korea Republic KRW 0 -2 -3 0 2.6
Mexico MXN 0 -1 0 +7 5.8
Nigeria NGN +2 +2 -6 -6 17.6
Norway NOK +3 +1 0 +8 3.4
Philippines PHP 0 -1 -3 -4 4.9
Poland PLN 0 -2 0 -2 5.5
Russia RUB +3 +3 +6 +8 6.7
Singapore SGD +1 +2 +1 +2 2.4
South Africa ZAR +1 -2 -1 +11 4.9
Sweden SEK +1 0 +1 +3 2.1
Switzerland CHF 0 +1 +3 0 0.9
Turkey TRY -4 0 -8 -12 19.6
United Kingdom GBP 0 0 -1 +6 3.2
United States of America USD +2 +2 +2 +1 5.3
Venezuela VES 0 -21 -52 -89 2719.5
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