Dollar Weakened Against Euro on Declining Oil Price Assumptions

Demand for the dollar steadied over the prior week as reflected by the Lebanese pound’s peg against the dollar that remained at $/LP 1,510-1,514 with a mid-price of $/LP 1,512, since the 4th of September, 2014. Foreign assets (excluding gold) at the Central Bank rose by a monthly 1.15% from $38.42B at end-September to $38.87B by end-October. Meanwhile, the dollarization rate of private sector deposits stood at 65.87% in September compared to 66.13% in December 2013.

The dollar weakened against the euro on assumptions that declining crude oil prices will alleviate inflationary pressure in the U.S., offering the Federal Reserve more time before raising interest rates and as the US added fewer jobs than expected. Hence the euro recovered 0.56% against the dollar, ending the week at €/$ 1.2463.

Demand of gold revived, as the US added fewer jobs than expected, last month, and as China and India increase their demand for the haven, taking advantage of its lowest price in four years.  The price of gold underwent a correction, going up from its lowest level since 2010 at $1,140.90/ounce to $1,161.58/ounce this week.

By Friday November the 14th, 2014, 12:30 pm Beirut time, the dollar-pegged LP depreciated against the euro going from €/LP 1,868.40, the prior week, to €/LP 1,878.80. The Nominal effective exchange Rate (NEER) gained 0.21%, weekly, to 142.15 points, widening its year-to-date gain to 10.14%.

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