Demand for the dollar strengthened over the week, as reflected by the Lebanese pound’s peg against the dollar that went down from $/LP 1,509-1,513 with a mid-price of $/LP 1,511 to $/LP 1,510-1,514 with a mid-price of $/LP 1,512 this week. Foreign assets (excluding gold) at the Central Bank dropped a monthly 2.25% from $38.73B at end-November to $37.86B by end-December. Meanwhile, the dollarization rate of private sector deposits stood at 65.72% in October compared to 66.13% in December 2013.
The euro tumbled against the greenback after increasing possibility that the European Central Bank will implement quantitative easing policy, in addition to shrinkage in industrial output in France and Germany. The euro weakened against the dollar by a weekly 1.99%, ending the week at €/$ 1.1818.
The persistence of low inflation rates in the U.S before the release of monthly employment data, in addition to the negative impact of decreasing oil prices on equity markets, caused an increase in demand for gold. The price of gold rose from $1,181.60/ounce on Thursday 2nd of January 2015 to $1,208.63/ounce this week.
By Friday January 9th, 2015, 12:30 pm Beirut time, the dollar-pegged LP appreciated against the euro going from €/LP 1,817.74, the prior week, to €/LP 1,781.56. The Nominal effective exchange Rate (NEER) gained 0.86%, over the week to 149.31points, while its year-to-date gain reached 1.35%.