Afternoon analysis 30.12.2015

, author:

Marcin Lipka

The dollar and the franc are the winners of the passing 12 months on the currency market. On the opposite side we have the recently devalued Argentinian peso, and the devoured by crisis Brazilian real. The zloty did fine in this ranking by losing 10% to its leaders, by gaining almost one percent to the euro.

Summary of 2015 on the currency market

The passing year will be remembered mainly in the context of the discussion regarding the monetary tightening in the USA, appreciation of the American currency, and increasing currency crisis in the countries which export raw materials, especially oil. Releasing rate of the franc was also a historical event. During one session it managed to gain even 30% to the euro or the dollar.

There are two currencies that should be considered as winners of this general global commotion. They are the franc (CHF) and the dollar (USD). This year the basket of the dollar containing five currencies (the euro, yen, pound, Canadian dollar, Swedish krona, and franc) gained approximately 9%. The situation was similar on the CHF. It even slightly accelerated the USD in a direct clash, and gained approximately a half percent to the buck.

However, it is worth noticing that the victory of the Swiss currency was not entirely unanimous. Excluding the moment of releasing the rate of the EUR/CHF, the franc was unusually stable. Especially in the second half of the year. Domination of the dollar was also not as clear as expected, especially considering its condition from the first quarter of the current year.

Appreciation of the USD was disturbed by postponed decisions of the Fed regarding hikes on interest rates. First, the severe winter disturbed the macroeconomic indexes. Then we had an overvalue on the stock markets related to anxieties regarding the condition of China. Finally, the monetary tightening in the USA began in December. However, 2015 will be in general remembered as a favourable year for the buck.

A relatively good condition of the Japanese yen can be a certain surprise. The USD/JPY pair began the year in limits of 120, and finishes it on a practically same level. This is a serious change after what could be observed a year before, when yen lost almost 15% to the dollar due to continuation of a very mild monetary policy of the Bank of Japan.

Out of the developed countries currencies, the Canadian dollar (CAD) and the Norwegian krona (NOK) lost respectively 16% and 14% to the dollar. This a second year of devaluation on a row for both of these currencies. Just two years ago the buck costed 1.06 CAD, and in December it was close to the level of 1.40. On the other hand, the dollar against the Norwegian krona is by 45% more expensive in comparison to the beginning of 2014.

Prices of oil were the lowest from decades, and they have clearly depreciated the Russian rouble. This year it lost 20% of its value. It is also worth reminding that two years ago the Russians paid 33 roubles per dollar. Now it is 73, which means a 65% overvalue, or looking from the other perspective, since 2014 the dollar expressed in roubles became more expensive by 123%.

We also had some other unusual events on the market. The Brazilian real lost almost 1/3 of its value due to the economic crisis, corruption affairs, and loss of investment rating. The Argentinian peso quoted a similar depreciation, although in this case it was caused by making the currency's rate real to the black market value of the ARS.

Looking at evaluation of the national currency to the euro, we are finishing this year slightly lower on the EUR/PLN (a decrease from 4.28 to 4.24), despite a significant enforcement in the first quarter, and a clear wear off in the current quarter. This means that the zloty gained approximately 1% to the European currency.

The situation looks different regarding the dollar. In this case the national currency lost approximately 10%. It has been once more confirmed that the zloty is very strongly co-related to the euro, and only very strong local factors, a clear increase in aversion towards risk, and significant differences in the monetary policy, are able to disturb the rate. In other cases, the PLN is simply floating on the sea of global changes.

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This commentary is not a recommendation within the meaning of Regulation of the Minister of Finance of 19 October 2005. It has been prepared for information purposes only and should not serve as a basis for making any investment decisions. Neither the author nor the publisher can be held liable for investment decisions made on the basis of information contained in this commentary. Copying or duplicating this report without the written permission from Sp. z o.o is prohibited.

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