Dollar Decreases as the Fed Maintains Rates and Inflation Eases in Europe

Lebanese Forex Market

Demand for the dollar on the Lebanese forex market increased over the past week, going from $/LP 1,514 within the range $/LP 1,513.75 – 1,514.25 on January 24th to a mid-price of $/LP 1,514.25 within the range $/LP 1,514 – 1,514. 5 on Friday.  

Foreign assets (excluding gold) at the Central Bank increased 9.75% since the beginning of the year to $40.71B by December 2016, boosted by the June 2016 Swap Operation coordinated by BDL with the MoF and the Lebanese commercial banks. The dollarization ratio of private sector deposits slightly hiked from 64.88% in Dec.2015 to 65.30% in Nov.2016.  

By Friday February 3, 2017, the euro appreciated against the dollar-pegged LP over the last week, going from €/LBP 1,612.12 on January 27 to €/LBP 1,619.36 on February 3. As for the Nominal Effective Exchange Rate (NEER) of the LBP, it decreased by 0.18% over the past week to stand at 117.51 points.

International Forex Market:

The dollar depreciated against the euro this week, as traders were unnerved by Trump’s comments on the Eurozone’s “grossly undervalued” currency and the Fed’s meeting Tuesday this week refrained from hiking interest rates, which was expected to strengthen the dollar. Europe’s key economic statistics also out on Tuesday carried optimism, announcing a higher than projected inflation, lower unemployment, and accelerated growth. Hence, the dollar fell from €/$ 1.0694 in the last week to €/$1.0742 this week.

Commodities:

Over the week, gold prices increased from $1,185/ounce on January 27 to $1,211.59/ounce this week, at 2:30 Beirut time.

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