August currency review

Following major declines in the value of currencies in Angola, Egypt, Ghana, Nigeria, Zambia and Zimbabwe this year, August saw another two African currencies take a plunge. Both the Ethiopian birr and the South Sudanese pound effectively lost half their value against the euro over the course of August (see first table below). 

The birr dived after Ethiopia's central bank had floated it to secure essential funding from the International Monetary Fund. South Sudan's central bank, on the other hand, simply couldn't afford to keep propping up its currency, given the loss of oil export revenues caused by the civil war raging in neighbouring Sudan (whose currency also fell in August). It is unclear as yet whether South Sudan will reimpose controls or let its currency float from now on.

Such sizeable devaluations are sure to spur even greater inflation as import costs rise, but higher prices will at least partly offset the impact of the currency fall on cost-of-living indices for expatriate staff in or from these countries.

Meanwhile, Gambia's currency also fell significantly against the euro, as did Angola's for the second month running. The African currency crunch we've seen ever since Russia invaded Ukraine in February 2022 has some way to run yet, it seems.

Another big faller in August was the Mexican peso. Perceptions of growing state dominance in the economy, a worsening business environment and deteriorating rule of law have caused investors to sell off the peso in recent months. It has lost 20% of its value against the euro since April and could have further to fall given that the incoming president, Claudia Sheinbaum, seems likely to continue the strongly statist policies of her predecessor.

As is usually the case, there were no especially big gains against the euro this month (see next table). However, after a couple of years of weakness the Japanese yen appears to have found its mojo again, gaining significantly for the second month in a row. Meanwhile, the New Zealand dollar reversed its losses from July.

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