Stronger Dollar Curbed Demand for Gold

Demand for the dollar steadied over the prior week as reflected by the Lebanese pound’s peg against the dollar that stood at $/LP 1,510-1,514 with a mid-price of $/LP 1,512. Foreign assets (excluding gold) at the Central Bank dropped a monthly 0.37% from $38.87B at end-October to $38.73B by end-November. Meanwhile, the dollarization rate of private sector deposits stood at 65.72% in October compared to 66.13% in December 2013.

The greenback strengthened after the Fed signaled, in its policy meeting, that it was on course to raise interest rates next year. The euro weakened against the dollar by 1.23%, ending the week at €/$ 1.2275.

Higher equities and a stronger dollar curbed demand for gold. The price of gold went down from $1,227.55/ounce last Thursday to $1,197.65/ounce this week.

By Friday December 19th, 2014, 12:30 pm Beirut time, the dollar-pegged LP appreciated against the euro going from €/LP1,873.52, the prior week, to €/LP 1,850.46. The Nominal effective exchange Rate (NEER) gained 0.77%, weekly, to 146.61 points, where its year-to-date gain reached 13.60%.

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