BDL Regains Control of National Exchange rate through Sayarafa

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 February 04, 2022.

The Lebanese Pound remained steady for the third consecutive week following BDL decision to inject dollars into the market through Sayrafa platform.  In turn, the national currency ended up the week at the rate of 21,500 LBP/USD on the parallel market. The BDL governor aims to reduce the instability of the national exchange rate in the parallel market by keeping the exchange rate near 20,000 LBP/USD, which can help the government to implement a more reasonable and realistic budget.

This week, the government continued discussions regarding the budget 2022, while disagreements between decision makers regarding the raising of revenue may occur later on, especially when it is passed for parliament for approval. Noting that the government will gather next week with the President Michel Aon to finalize the budget, which also expected to not be smooth sailing.

In turn, the dollarization ratio for private sector deposits decreased from 80.09% in October 2021 to 79.96% in November 2021.

As for the Euro/LBP currency pair, the Euro appreciated against the dollar-pegged LBP with the currency pair going from last week €/LBP 1,676.68 to €/LBP 1,725.91 by February 04, 2022. Moreover, the Nominal Effective Exchange Rate (NEER) of the Lebanese pound decreased weekly by 1.10% to stand at 151.58 points on February 04,2022.

International Forex Market

The Euro/USD appreciated against the dollar from last week from €/USD 1.1122 to €/USD 1.1449 by February 04, 2022. The Euro improved in front of dollar amid the high inflation rates that is hurting the economy. On the other hands, the greenback has suffered this week after the release of the U.S sector employment report that showed a drop in U.S sector employment in January.

Commodities

Gold price increased by 1.32% at the end of this week to $1,810/ounce.  The high inflation rates are certainly affecting gold price. The Fed aims to control the inflation rate by increasing interest rates. The Fed believes that the high inflation rate is temporary and the supply crisis will heal by time.

Crude oil prices jumped this week by 5.75% to $92.44/Barrel. In fact, several factors are increasing the prices of black gold. One of them is the tension between Ukraine and Russia, and the risk of war that may happen due to political conflict, adding to that the high global inflation rates due to supply chain shortage. Also, the increase is supported by the hike of the global demand as some countries have eased restrictions and have return to the normal life.