Higher Fed Rates Strengthened the Dollar over the Past Week

Lebanese Forex Market 

The Lebanese Pound traded within the range of $/LP 1,513.75 -1,514.25 against the dollar with a mid-price of $/LP 1,514, as it did last week.

The peg continues to be supported by the Central Bank’s solid foreign assets, which reached $43.4 billion in February 2018.

The dollarization ratio of private sector deposits grew from 65.84% in December 2017 to 68.44% in January 2018.

Over the past week, the Euro depreciated against the dollar-pegged LP going from €/LBP 1,860.45 to

€/LBP 1,857.99 this week.

As for the Nominal Effective Exchange Rate (NEER) of the LBP, it rose from 109.14 points last week to 109.16 points this week.

International Forex Market

The euro lost ground against the dollar this past week as shown by the 0.13% decline in the euro-dollar from €/$ 1.2341 last week to €/$ 1.2325 this week. The dollar’s strength came after the Fed raised rates this week from 1.5% to 1.75%, making it the first rate hike under the Fed’s new chairman Jerome Powell and the sixth since December 2015. The rationale behind higher rates lies in the more robust GDP growth forecasts for the US economy; officials from the Fed recently upped their GDP growth forecast for the year 2018 from 2.5% to 2.7% and from 2.1% to 2.4% for the year 2019.


Meanwhile gold prices grew over the past week from $1,320.65/ounce to $1,342.17/ounce this week on account of rising uncertainty regarding trade wars between the US and China, especially after President Donald Trump announced tariffs on Chinese goods.


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