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CURRENCIES THAT HAD THEIR BIGGEST FALL THIS YEAR

CURRENCIES THAT HAD THEIR BIGGEST FALL THIS YEAR August 3, 2017Leave a comment

Currencies that had their biggest fall in 2017 has a lot of implications on businesses. If you are interested in stocks, securities, and financial markets, or you are venturing into international business, or just traveling outside your country; the knowledge of depreciated currencies will come in handy when making your plans.

The de facto standard all currencies are measured against is the dollar. Well, technically economies use the fiat standard. It used to be the gold standard but countries long left the gold standard because the amount of gold we can dig up is limited. And unsurprisingly the value of the dollar is closely linked to the one commodity the whole world needs but cannot produce by themselves -the price of Oil. A drop in the price in oil prices and dollar goes the other direction like a jilted lover. The standard is now the Oil standard (pretty slick huh?)

This is good news for countries whose economies that largely depend on oil, or is it? When the price of Oil slumps, the value of that country’s currency nosedives just as well. The value of a country’s currency is an indicator of how well its economy is performing. Aside oil prices, other factors such as a coup, internal conflicts, embargos, and others can cause a currency to be devalued. Last year brought about the biggest slump in oil prices in recent history and gravely affecting oil-exporting countries. Such was the case for Nigeria – an economy that is 70% dependent on oil. Its currency, the Nigerian Naira slumped 37% against the US dollar as a result. The slump in the Mexican Peso came about in the form of an almost 17% drop against the US dollar in 2016.

Our data is based on Forex sites (https://www.barchart.com/forex/performance-leaders#/viewName=main&timeFrame=ytd ) that track minute and day-to-day changes of any currency against the dollar. A falling currency is termed “bearish market” in Forex-speak. It means investors think things are going to get worse and therefore enter the market with a sale. If the markets fall by more than 20% then we have entered a bear market. A bear market is a market showing a lack of confidence. Prices hover at the same price then go down, indices fall too and volumes are stagnant.

The currencies with the biggest fall this year (from 31st December to current date) are the currencies with the worst market performance. They are

  • Czech Koruna: sometimes referred to as Czech crown. The koruna is one of European Union’s 11 currencies. The Koruna dropped by over a 14% in value against the dollar. The rate of inflation in Czech caused The Czech National Bank to scrap a longstanding cap on the koruna’s strength. While the timing of the removal of this policy — dubbed Czexit by market observers — was something of a surprise, the central bank was widely expected to remove the policy before the middle of the year.
  • Polish Zloty: A close second is Zloty. Deflation continues to have a hold on Poland’s economy. And forecasts seem to suggest that the trend is likely to continue.
  • Mexican Peso: Not far behind is the Mexican peso still reeling from Trump’s victory in the election. On the back of Trump’s hostile rhetoric towards Mexico, the currency is still wounded.
  • Swedish Krona: A drop of 10% compared to 13% for the peso is a bit ways behind. However, months after a rapid fall in the Swedish krona, it is still yet to fully recover as the krona continues to slide.
  • Norwegian Krone: Dropped by around 8%. A disappointing inflation update and the fluctuating price of oil has not helped the currency.

Other currencies that have also had significant depreciation in value are the Korean Won, the Canadian Dollar, and the Indian Rupee.

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