|Euro / LBP
|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 by September 30, 2022. Unexpectedly, however, Lebanon’s finance minister stated during this week that Lebanon is planning to re-peg the exchange rate for the first time in 25 years, from 1,507 LBP/USD to 15,000 LBP/USD by the end of October 2022. This move came step closer to IMF’s demand towards unifying multiple rates as well as to restore confidence in the market. Hence, the adoption of the new exchange rate remains subject to approval of a financial recovery plan of which it still need to be discussed in parliament.
Meanwhile, on the parallel market this week, the Lebanese national currency has fluctuated between a minimum of LBP/USD 36,600 and a maximum of LBP/USD 39,000 to end up the week at USD/LBP 38,600.
As for the Euro/LBP currency pair, the Euro appreciated slightly against the dollar-pegged LBP with the currency pair going from last week €/LBP 1,459.02 to €/LBP 1,480.81 by September 30, 2022. Moreover, the Nominal Effective Exchange Rate (NEER) of the Lebanese pound slightly decreased marginally by 0.02% weekly to stand at 172.01 points on September 30, 2022.
International Forex Market
The Euro has rebounded against the dollar by the end of the week, closed at $0.9823, while the dollar index dropped against the six major currencies, and traded 1.22% lower at $111.67, down from last week $113.05.
Meanwhile, after the hawkish outlook from the Fed, the green currency was continuing to rise to multi-year highs when the Bank of England declared it would effectively resume its quantitative easing program and start purchasing gold on an ongoing basis. This announcement has led to a spark in risk on global markets but reflected positively on the British pound and the Euro that gained strongly against the US dollar.
Beyond the Fed, other major central banks have made important steps towards strengthening their currencies. For instance, Bank of Japan intervened clearly in the currency market for the first time since 1998 to uphold the rapid declining Yen. Meanwhile, Bank of England and the Swiss National Bank both hiked heir interest rates while the British pound dropped to its lowest levels since 1985 with dramatic sell-off after the tax cut declaration of the British Government, which are to be funded by a new tranche in Government borrowing.
Gold prices added 1.70% to $1,670.99/ounce as a slight decline in the dollar revived some of its safe-haven appeal, but despite expectation of sharp rate hikes, the yellow metal is near two years low.
Crude oil prices added 4.37% this week but prices remained relatively low at $82.18/barrel in line with recession fears that are driving prices down to an eight-month low. Demand concerns have reappeared as higher rates would trigger a global economic slowdown faster than expected, thus leading to lower demand especially as OPEC+ are considering a significant production cut to support prices.