Dollar Appreciates While a First-ever US Default is Looming

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 October 1, 2021.

This week, the national currency bounced back and recorded USD/LBP 17,400 by week ending October 1, 2021. Meanwhile, BDL confirmed late in this week that it is keen to protect the rights of depositors which are suffering from the current ongoing crisis. Moreover, BDL extended the benefit from Circular No 151 to the end of January 2022 until the new government presents its reform plan. In addition, the Central Bank amended the Circular No 158 to allow the customers to benefit from the two aforementioned circulars, simultaneously in different banks.

In turn, the dollarization ratio for private sector deposits decreased from 80.37% in December 2020 to 80.21% in July 2021.

As for Euro/LBP currency pair, the Euro depreciated against the dollar-pegged LBP with the currency pair going from last week €/LBP 1759.35 to €/LBP 1743.67 by October 1, 2021. Moreover, the Nominal Effective Exchange Rate (NEER) of the LBP slightly increased by 0.23% since September 24, 2021 to stand at 142.55 points on October 1, 2021.


International Forex Market

The Euro/USD depreciated against the dollar from last week €/USD 1.1671 to €/USD 1.1567 by October 1, 2021. Despite the European Central Bank’s decision to slow down their Bonds purchasing, the green currency has been on a steady rise relatively to the Euro and to the British pound also.  Moreover, short term interest rates added up and the US treasury yields edged higher.


Gold price slightly increased by 0.55% at the end of this week to $1,753.34/ounce, while US dollar appreciated this week. Meanwhile in the US, political battles over debt, deficits, and the debt ceiling are taking over the news. The dollar might be vulnerable as a first ever American default is looming. So, how long will the green currency stay the strongest?

In fact, the Fed decided last week to taper the amount of securities it will buy on monthly basis as well as it is looking to increase the interest in year 2022. However, enormous uncertainty is surrounding the US economy as it will surely negatively affected by such an unprecedented default if it would occur, in particular with the ongoing challenge of the worldwide pandemic.

In addition, Crude oil prices increased this week by 1.25% and recorded $77.99/Barrel. In fact, a sign of supply/demand tightness with surging prices for natural gas is seen strongly. Moreover, energy crisis in Europe would likely spread to the rest of the world and this would have a far reaching impact on the world economy. However, as the global economy continues to recover from COVID, oil and gas will both see demand growth. Moreover, OPEC mentioned that it is working to keep crude prices close to $70 per barrel while some options traders are anticipating an energy crunch will happen and oil prices might soar to a record $200 a barrel! Interesting to notes.

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