Euro Advanced by 0.59% Against the Dollar over the Past Week

During the period 17-24 April 2015, demand for the dollar remained stagnant on the Lebanese Forex market, as shown by the Lebanese pound’s peg against the dollar which maintained a quote of $/LP 1,510-1,514 with a mid-price of $/LP 1,512. Foreign assets (excluding gold) at the Central Bank decreased by a monthly 1.06% from $38.89B by end-February to $38.48B by end-March. Meanwhile, the dollarization rate of private sector deposits stood at 65.51% in January 2015 compared to 65.71% in December 2014.

Over the above mentioned period, the Euro strengthened by 0.59% to €/$1.0884. The euro has been showing signs of a recovery versus the dollar on account of the latest underwhelming US economic news according to which jobless claims rose more than expected. The Federal Reserve would like to see improvement in the labor market before hiking interest rates. Accordingly, a recent Bloomberg survey illustrated that a rise in interest rates won’t occur until after Q3 of this year. Furthermore, cash-needy Greece making some progress in obtaining future funds coupled with the completion of the first round of the ECB’s bond buying program worth 60 billion Euros/month, rallied the Euro upwards.    

Price for gold dropped from $1,202.42/ounce on the 17th of April 2015 to $1,191.20/ounce this week as India, the largest consumer of gold, has been witnessing lower rainfall during the monsoon season. This in turn is affecting agriculture and pushing gold prices downwards with farmers being the primary consumer of gold in India. However, demand for gold, a hedge for inflation, might recover in the upcoming week with China (second largest consumer of gold) entering a stimulus program and with the trend in international oil prices moving upwards. 

By Friday April 24th, 2015, 12:30 pm Beirut time, the dollar-pegged LP depreciated against the euro going from €/LP 1,631.12 on the 17th of April to €/LP 1,640.76. The Nominal effective exchange Rate (NEER) lost 0.02% to 164.14 points bringing its year-to-date gain to 11.42%.

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