Lebanese Forex Market
Since the onset of national civic protest in October 2019, the imposition of capital controls alongside the deterioration of the economy on multiple fronts has contributed to creating a dynamic foreign exchange 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 and is supported by the Central Bank’s foreign assets totaling $28.5 in August 2020. However, BDL intervenes by namely allowing small depositors to withdraw their dollar savings in LP at the rate of 3,900 while keeping the rate of conversion into US dollars at the “official rate”.
Meanwhile, the dollarization ratio for private sector deposits increased from 76.02% in December 2019 to 79.83% in June 2020.
As for Euro/LP currency pair, the Euro depreciated against the dollar-pegged LP with the currency pair going from last week’s €/LBP 1,790.58 to €/LBP 1,782.81 by September 4, 2020.
In turn, the Nominal Effective Exchange Rate (NEER) of the LBP recorded a weekly uptick of 0.28% to stand at 127.48 points over the same period.
International Forex Market
The Euro/USD went up from last week’s €/USD 1.1878 to €/USD 1.1826 by September 4, 2020. The US dollar has managed to halt its recent slide and traded higher with traders cautious ahead of the release of U.S. jobs data that could shed some light on the strength of the country’s economic recovery. Meanwhile, the Euro ticked lower following the latest retail sales figures from Germany. In details, figures reported a 0.9% fall in sales growth in July, missing the 0.5% forecasted expansion, while revising June’s contraction down from -1.6% to -1.9%
Commodities
As the dollar rallied this week Gold declined by a weekly 1.45% this week to reach $1,935.91 an ounce by September 4, 2020. Worth mentioning that Gold, concerned a safe-haven during times of social and economic uncertainty, has seen substantial price increases since the onset of the COVID-19 pandemic with prices topping out above $2,072 in August
Oil tumbled to the lowest level in more than a week ($44/per barrel) with the expectation that refinery demand for crude will weaken in the fall and as investors sought refuge in a stronger dollar. Moreover, although U.S. benchmark crude futures have rebounded from April’s negative territory, price rallies remain limited amid uncertainty over when oil consumption will return to normal. Demand may also take a hit over September and October as Chinese imports ease with state-issued quotas for independent refiners dwindling following a crude-buying spree earlier this year.