Reviewing the currency world’s risers and fallers for the year ending tonight.
Jim, your blog on currencies prompted me to check the 2008 risers and fallers in the world of fx – and a selection of currency rates from the end of last year, and from this morning, is given in the table below. I’ve also shown the percentage change for the year.
|
31/12/2007 |
31/12/2008 |
% change |
|
| US$/Yen |
113.12 |
90.25 |
-20.22% |
| €/US$ |
1.4716 |
1.4084 |
-4.30% |
| £/US$ |
1.9997 |
1.4458 |
-27.70% |
| £/€ |
1.3589 |
1.0272 |
-24.41% |
| US$/CHF |
1.1241 |
1.0562 |
-6.04% |
| £/Yen |
226.21 |
130.37 |
-42.37% |
| US$/ISK |
62.58 |
123.1 |
96.71% |
| US$/RUB |
24.51 |
29.48 |
20.28% |
| US$/UAH |
5.141 |
7.93 |
54.25% |
| US$/CNY |
7.314 |
6.854 |
-6.29% |
| US$/BRL |
1.7741 |
2.356 |
32.80% |
What stands out?
The yen has been the big gainer, rising over 20% against the dollar, and by 42% against sterling. Suddenly I don’t feel so bad holding the Lyxor Japan Topix ETF in my self-select pension plan (SIPP) – for a UK-based investor the yen’s gain has pretty much counterbalanced the Japanese equity market’s fall in 2008.
The Euro (+4%), Swiss Franc (+6%) and the Chinese Yuan (+6%) have all gained against the dollar, although it’s been a year of wild swings, with the USD hitting both 1.60 and 1.25 against the Euro, before settling in the 1.40s (where it began 2009) at year-end.
Sterling has taken a beating, approaching parity against the Euro in the last few days, having started the year at 1.36 – although the UK is left in second place, amongst the “developed” economies (these classifications are increasingly debatable) in the competition for credit crunch victim of the year, by Iceland, whose currency lost a cool 97% against the dollar.
Emerging market economies started to feel the strain towards year-end as well – 2008 saw devaluations versus the dollar of 20% for the Russian rouble, 33% for the Brazilian real, and 54% for the Ukrainian hryvnia – most of the moves occurring in the last couple of months.
Devaluing the currency is the easy way out for governments faced with deflating economies, debt problems and fiscal strains and, as you say Jim, we’re likely to see a lot more of this in 2009. The only question is who devalues first and fastest.
Looking from a UK perspective, it’s a surprise that our devaluation hasn’t attracted more press coverage as, after all, we’ve all become a quarter poorer against our Euro-based neighbours over the year, before even starting to calculate the losses from property and equity market declines.
Perhaps everyone’s too numb to notice – or perhaps most people don’t have much in the way of savings and don’t care. In any case it’s a mystery to me why investors are happy to lend to the government, via the gilt market, at yields of 1%-3%, when the pound has been depreciating at a rate which is multiples higher.
One currency I didn’t mention – gold – also had a reasonable year, gaining 3.5% against the dollar (from $833/oz to the current $862). I suspect that gold and its sister currency, silver (a 25% faller versus the dollar in 2008, from $14.77 to $10.98 an ounce), will be the ones to watch in 2009, as the fiat currency experiment that we’ve been part of since 1971 takes another step towards the final conflagration of paper, or should I say electronic, money.
All will be revealed, starting tomorrow. In the meantime I wish all IndexUniverse.eu readers a healthy, peaceful and prosperous new year!
