Lebanese Forex Market
Since the onset of national civic protest in October 2019, capital controls imposed alongside the deterioration of the economy on multiple fronts contributed to creating a dynamic parallel market in Lebanon.
To-date, the Lebanese Pound (LP) remains pegged to the US dollar within the official range US$/LP 1,514 to 1,514.5 with a mid-price of $/LP1,514.25 which is supported by the central bank’s foreign assets totaling $32.96 in June 2020. However, since April 2020 BDL intervened by namely allowing small depositors to withdraw their dollar savings in LP at the rate of 3,000 while keeping the rate of conversion into US dollars at the “official rate”.
Notably, the week ending July 2 2020 witnessed the USD/LP currency pair crossed the 9,000 mark in the parallel market, despite ongoing collaboration efforts between BDL and market exchangers to tie down the currency pair at close to 3,000 or 3,200.
It is also worth mentioning that the dollarization ratio for private sector deposits increased from 76.02% in December 2019 to 79.57% in May 2020.
As for Euro/LP, the Euro appreciated slightly against the dollar-pegged LP with the currency pair going from last week’s €/LBP 1,690.15 to €/LBP 1,690.83 by July 2.
In turn, the Nominal Effective Exchange Rate (NEER) of the LBP rose by a weekly 6.11% to stand at 129.29 points over the same period.
International Forex Market
The Euro/USD went up from last week’s €/USD 1.1212 to €/USD 1.1216 by July 2, 2020. The euro appreciation is mainly due to lower USD dollar hit by traders weighing the conflicting influences of positive economic data and the increasing number of coronavirus cases. In details, the U.S. recorded Thursday an addition of 4.8M jobs in June and the manufacturing activity rebounded more than expected which suggests that the vast sums of money injected by the monetary and fiscal authorities around the world are bearing fruit. However, another spike in coronavirus infections threatens to put the brakes on economic activity once again.
The U.S. recorded more than 52,000 new cases on Thursday. More than three dozen U.S. states have seen increases in Covid-19 cases prompting them to delay and in some cases reverse plans to let stores reopen and activities resume.
Commodities
In turn, Gold witnessed a weekly uptick of 0.01% to close the week at $1,775.13/ounce. Moreover, US crude oil prices rose weekly by 5% to $42.53 a barrel driven by better-than-expected U.S. job growth in June and the biggest weekly domestic crude supply decline since 2019.