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August currency review

Argentina has been in a ruinous economic bind for so long now, one wonders if it will ever be able to fix it. The only way it can afford to run the state is by printing money, but that devalues the peso (21% loss against the euro in August - see first table) and causes soaring inflation (latest 113.4%).

One solution would be a massive cost-cutting programme, but when ex-president, Mauricio Macri, tried to impose one between 2015 and 2019, it was so unpopular he was voted out of office before the work was anywhere near finished. He was replaced by a big-spending Peronist, Alberto Fernandez, and Argentina's slide towards crisis continued. With a new presidential election due in October, one of the candidates, libertarian Javier Milei, is proposing full dollarisation of the economy.

When Zimbabwe adopted the dollar as its currency in 2009, its annual inflation dropped overnight from 89.7 sextillion percent to zero. Great result on inflation. Unfortunately, not so good for the economy. If you're going to replace your currency with a foreign one, you actually need to have lots of the new currency in circulation, otherwise nobody can pay for things and your economy will stagnate. Zimbabwe's collapsed economy had nowhere near enough dollars going round and has failed to function properly ever since. Indeed, it later brought back its own currency (although the economy remains 80% dollarised).

Worryingly for Argentina, its foreign-exchange reserves are also seriously depleted and there is no prospect of it being able to afford full dollarisation in the near future; at least, not without making its economy function even worse. Argentina has more chance of obtaining dollars than Zimbabwe ever had, because it sells lots of exports, but even so, it would take a long time to build these up enough and the sacrifices involved (imported goods would have to be cut massively, for instance) would in all likelihood lead to Señor Milei being hounded out of office long before the job was done. And so it goes on.

Countries experiencing largest currency losses in August


Currency code Movement v EUR
31 Jul - 4 Sep 2023 (%)
Argentina ARS -21 113.4
Sierra Leone SLE -5 44.8
Syria SYP -5 n/a
Venezuela VES -9 398.2
Zambia ZMW -6 10.8
Zimbabwe ZWL -22 77.2

Having raised the value of the Zimbabwe dollar by a fifth in July, in a cynical attempt to slow inflation before August's general election, the re-elected government lost no time in letting exchange rates collapse again. Not for the first time, the Zimbabwe dollar was the world's weakest currency during the month and, due to the result of the allegedly rigged vote, the country can expect little in the way of economic improvement over the next five years at least.

Only two countries saw their currencies gain more than 3% against the euro during August:

Countries experiencing largest currency gains in August


Currency code Movement v EUR
31 Jul - 4 Sep 2023 (%)
Seychelles SCR +4 -2.0
Sri Lanka LKR +5 4.0

Although it didn't quite make it onto the biggest losses list, the Russian rouble fell heavily again this month, down another 4% against the euro. It has depreciated by 42% overall in the last year (see next table) and its persistent weakness suggests international sanctions and Russia's isolation are beginning to have a serious impact on its economy. Things will only get worse if the currency keeps sliding; music to the ears of all Ukrainians, no doubt.

In other currency news, the central bank of Lebanon has stopped publishing its 'Sayrafa' exchange rate and promised a new platform to replace it. ECA uses the Sayrafa rate for its cost of living surveys and exchange rate calculator and will continue to cite the last-published rate of USD1/LBP85,500 (from 31 July) until the new platform is set up. The reason the bank gave for dropping Sayrafa, which tracked a little below parallel market rates, was that it presented opportunities for arbitrage and corruption. So, the assumption is that the new regime will track much closer to market rates (latest USD1/LBP89,500), although this has not been stated.

Finally, here is our monthly selected currency movements table:

Selected currency movements (v EUR)
Country Currency code % movement to 4 September 2023 v EUR since: Latest official annual inflation (%)
(1 month)
(3 months)
(6 months)
(12 months)
Argentina ARS -21 -33 -46 -64 113.4
Australia AUD -1 -2 -7 -12 6
Brazil BRL -3 +1 +2 -3 4
Canada CAD -1 0 -2 -11 3.3
Chile CLP -1 -7 -7 -4 6.5
China CNY 0 -3 -7 -12 0.2
Egypt EGP +2 -1 -3 -43 36.5
India INR +1 -1 -2 -12 4.3
Indonesia IDR +1 -3 -2 -10 4
Japan JPY -2 -5 -10 -12 3.2
Kenya KES -1 -6 -15 -25 6.7
Korea Republic KRW -2 0 -3 -5 2.3
Mexico MXN 0 +3 +5 +8 4.8
Nigeria NGN +3 -40 -40 -48 25.8
Norway NOK -3 +3 -5 -13 5.4
Philippines PHP -2 -2 -5 -8 5.4
Poland PLN -1 +1 +5 +5 11.5
Russia RUB -4 -18 -24 -42 4.3
Singapore SGD 0 -1 -3 -5 4.1
South Africa ZAR -4 +4 -5 -15 4.7
Sweden SEK -3 -3 -8 -10 9.3
Switzerland CHF 0 +1 +3 +2 1.6
Turkey TRY +2 -25 -31 -37 58.9
United Kingdom GBP 0 +1 +3 +1 6.8
United States of America USD +2 -1 -2 -8 3.2
Venezuela VES -9 -20 -26 -78 398.2
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