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four Currencies to Focus on 2017

Published on 8 February 2017 in News - Pages by Raffick Marday

The dynamics of various currencies have had an increasingly disruptive effect on the general global economy and its dynamics since 2015. These dynamics can be exemplified by the American dollar’s surge in value against most other major currencies, especially the commodity currencies. The devaluation of the Yuan in the same period led to sharp and short corrections on most global equities after the People’s Republic of China decided to significantly devalue its currency.

The same tumultuous challenges in currency markets have been ongoing in 2016 after another devaluation of the Yuan in January. These currency fluctuations affect the global economy, and here is a list of the four most dynamic major currencies to look out for because they may have a significant impact on the global economic trend.

Currencies under Focus is the Chinese Yuan
The dollar reigns supremely in the foreign currency exchange markets, but in the recent past focus has shifted to the Chinese Yuan. The Yuan is a currency to watch because China is a major economic power and its exchange rate is not market-determined. Instead, its exchange rate is determined by the Chinese Central Bank through a managed float’ system, which is used to determine the rate based on the basket of major managed currencies such as the Euro and USD.

four Currencies under Focus in 2017

China had permitted a Yuan appreciation period of about one decade to reduce China’s trade deficit and live up to calls from major global powers such as the USA. But after 2014, the Chinese monetary authority devalued the Yuan. The 1.8% and 1.4% devaluations of the Yuan in 2015 and 2016 led to market disruptions because it took the currency to its lowest level in about half a decade. The devaluation of the Yuan was probably meant to make Chinese exports cheaper and encourage more exports. But this intensified the deflationary forces in the economy of the world.

Such devaluations are expected initiate counter-devaluations aimed at increasing currency competitions against the Chinese currency. The devaluation may have been also a sign that the Chinese economy was not doing so well after all, and all these factors have negative effects on the global economy and its growth. The Yuan currently exchanges at a rate of 1 USD to 6.56 Yuan and economists should focus more on the Yuan because any more devaluation or appreciation of the currency would have significant global economic effects.

Currencies under Focus is the Brazilian Real
The Real had the worst performance in 2015 among major global currencies. The Real dropped in value by 33% against the Green buck.’ This culminates in 58% drop over half a decade since 2010. The recession period led to the downgrading of Brazil’s credit rating, and this factor coupled with wayward corruption and political stalemates led to a decline in currency’s value to a 4.25 record low against the USD.

The consumer and business confidence in the nation declined significantly in 2015 and its equity index remained low after being on a very low level for about seven years. With all these factors still in place, the Real is expected to stay low in the last quarter of 2016 and perhaps even trade at an even lower period in 2017when compared to the 2016 levels. The declining commodity prices may also contribute to this negative trend.

four Currencies to Focus on 2017

Currencies under Focus is the Canadian Dollar
The Canadian loonie’ or dollar went down in the foreign currency exchange markets by 16% against the USD last year. This performance was the 3trd worst among 16 major world currencies. In fact, it slid a record three-year low by 28%. The slow global economic growth in 2015, Canada’s experience of a recession, low commodity prices, interest rate cuts by monetary authorities, and a decline in crude oil prices by 30% can be cited as the major factors, which led to the decline of the Loonie’s’ value.

However, a positive turn of events was expected this year as major trading partners of Canada improve their economic strength, and this was expected to offset the slow recovery of the Canadian economy. The last quarter of 2016 has seen significant improvement in exports and fiscal measures aimed at rectifying the slowdown and there is hope that the Loonie’ may rise soon.

Currencies under Focus is the Euro

The economic crisis in Greece is perhaps one of the first reasons why there have been several speculative attacks on the Euro, which is a regional currency. The Canadian dollar was devalued by 10.2% against the USD in 2015 and in December it had gone down to about 1.05 to the USD.
The European Central Bank measures to revive the currency were less dramatic and some traders’ forecasts reveal that it may go low to the level of the USD by the end of 2016. This expectation seems to be on its way to the realisation after Brexit as the UK tries to get out of the European Union. If this will be possible after Brexit, is indeed something to watch out for in 2017.

In conclusion, these major global currencies represent a significant chunk of economic trade, and their observed dynamic shifts so far imply that they may have significant impacts. As such, these four will be a focal point for all traders and currency exchange businesses.

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