|Euro / LP
|Euro / Dollar
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 January 14, 2022.
The Lebanese Lira had further depreciated against the dollar early this week to record a new high of USD/LBP 33,500 on Tuesday. The Lebanese Lira then re-picked itself in the parallel market to reach USD/LBP 25,000 by end of week. The drop was a result of the circular number 161 amendment effective as of January 14, 2022. Depositors have the chance to exchange their Lebanese cash holdings to fresh US Dollars at the Sayrafa Exchange rate, USD/LBP 24,700.
This decision pushed depositors to sell their dollars in the parallel market, in a way to increase their LBP cash holding prior to executing the said transaction. As a result, the huge demand for LBP in the parallel market led to the decline of the exchange rate and appreciation of the Local currency. We foresee that the parallel market exchange rate will continue to decline over the weekend prior to the banks resuming work on Monday.
On a different note, it is worth noting that this amendment will help shrink the gap between the parallel market and Sayrafa exchange rate in the coming weeks and most importantly eliminate the arbitrage that is taking place.
In turn, the dollarization ratio for private sector deposits decreased from 80.09% in October 2021 to 79.96% in November 2021.
As for Euro/LBP currency pair, the Euro appreciated against the dollar-pegged LBP with the currency pair going from last week €/LBP 1,702.65 to €/LBP 1,723.95 by January 14, 2022. Moreover, the Nominal Effective Exchange Rate (NEER) of the LBP decreased weekly by 0.81% to stand at 151.40 points on January 14, 2022.
International Forex Market
The Euro/USD appreciated against the dollar from last week €/USD 1.1295 to €/USD 1.1436 by January 14, 2022. As fastest inflation was marked in the US, stock prices rose and US Dollar experienced a depreciation. Moreover, the Fed explained that US economy grew at a modest pace in the final weeks of last year, and businesses’ expectations for growth over the next several months have cooled in some places.
On a further note, U.S. Initial Jobless Claims Rose to the highest since Mid-November, jumping to 230,000 claims, thus adding pressure on the US economy and its currency.
Gold price appreciated by 1.70% at the end of this week to $1,822.4/ounce as the dollar struggled this week. Gold traded higher as US Treasury yields dropped this week.
Crude oil prices jumped this week by 6.17% to $85.21/Barrel, noting that oil prices typically move inversely to the U.S. dollar. As this week experienced a weaker dollar and easing of worries regarding the Omicron coronavirus variant, this boosted the decision of increasing Oil Production by 400,000 barrels per day starting February as agreed by OPEC.