The National Currency Hit New Lows this Week Adding more Misery for Millions of Lebanese People

Lebanese Forex Market

To-date, the Lebanese Pound (LBP) remained steady within the official range of USD/LBP 1,514 to 1,514.5, with a mid- price of USD/LBP 1,514.25 in the week of July 02, 2021.

The Lebanese lira continues its devaluation in the parallel market and hit 17,250LBP/USD by the end of the week of 02, July 2021. The financial crisis in Lebanon has become unbearable for most of the Lebanese people, as they are suffering to secure their basic needs like gasoline and some of necessary medications. All this is happening while the political deadlock continues to shadow over the situation with the absence of any serious steps to form the awaited government. Lebanon is sinking right now and may need a miracle in order to stop the collapse.

In turn, the dollarization ratio for private sector deposits decreased from 80.37% in December 2020 to 80.24% in March 2021.

As for Euro/LBP currency pair, the Euro depreciated against the dollar-pegged LBP with the currency pair going from last week’s €/LBP 1,797.50 to €/LBP 1,780.25 by July 02, 2021. Moreover, the Nominal Effective Exchange Rate (NEER) of the LBP increased by 0.54% since 25 June 2021 to stand at 141.29 points on 02, July 2021.

International Forex Market

The Euro/USD depreciated against the dollar from last week’s €/USD 1.1924 to €/USD 1.1809 by July 02, 2021. The increase of US dollars against the Euro is a result of combination of two factors. The first factor is that the Federal Reserve will be applying a tighter monetary policy in order to control the inflation. The second factor is that the vaccination rollout in the US are doing great as most of the American population are now fully vaccinated, which increase the trust to a clean economic rebounds. For the upcoming weeks, we expect a stronger Dollar amid the US employment data that showed that the U.S has added 950,000 jobs in June.

Commodities

Gold price slightly increased by 0.30% at the end of this week to $1,787.4/ounce. The increase of price of gold came after a huge decrease on its price after the Federal Reserve announced last week that they will increase interest rates. The small rebound of gold price is an indicator that investors are still having some doubts about the efficiency of such a monetary policy and if it will succeed to control the inflation rates despite the measures taken by the Fed.

In addition, Crude oil prices increased this week by 0.40% to reach $75.64/Barrel hitting its highest level since October 2018.  The price of crude oil is up more than 11% in the past month. The consecutive increase of the price of crude oil reflects the economic recovery that is increasing the global demands. Further Bank of America said oil can increase all the way to 100$ per barrel amid accelerating demand.

Leave a Reply

Your email address will not be published. Required fields are marked *