Exchange rates against the euro in 2018

The end of the year is an opportunity to take stock of the evolution of exchange rates of various currencies against the euro in 2018. The graph below provides a synthetic overview of the main dynamics recorded this year: it lists the currencies whose exchange rate has recorded significant depreciation or appreciation against the euro. For each currency, the graph shows:

• the depreciation/appreciation rate at the end of the year with respect to the values at the beginning of 2018;
• the maximum depreciation/appreciation rate recorded during the year and the values of the exchange rate against the euro on the corresponding date.

Venezuelan Bolivar Soberano is the currency that depreciated the most during 2018. At the end of the year, it suffered a depreciation of over one million percent. Only in the last week of December, the Bolivar has depreciated by 26%, attesting to the failure of the government policies aimed at strengthening the exchange rate, containing inflation and restoring stability.

Excluding the anomalous case of the Bolivar, Argentine Peso was the weakest currency during the year. It has depreciated by almost 100% in 12 months but, in the last 3 months, it has been able to regain part of the lost value: it recoverd from 47.8 pesos per euro on October 1 to 43.8 on December 28.

At the end of the year, the depreciation of Turkish lira was lower than 40%, far better than the Argentine peso. Just like Argentine Peso, Turkish lira experienced a considerable recovery from its highest depreciation value, recorded in August (7.87 liras per euro).

The possibility of the currencies to recover after a heavy depreciation is the common factor recorded this year among Argentine Peso and Turkish Lira, but also Brazilian Real, South African Rand, Indian rupee and Indonesian rupiah. Their strengthening is sustained by several factors:

• change of expectations, due to political events: Bolsonaro election in Brazil, for instance;
• government actions aimed at curbing inflation, such as those carried out in Argentina, South Africa, Turkey and Indonesia;
• the help of the International Monetary Fund, which intervened in Argentina and is likely to grant a lending to Turkey;
• decrease in the price of oil, with positive effects on Indian Rupee and on Indonesian Rupiah.

A continuous but controlled process of depreciation has characterized Tunisian Dinar (see the article), Chilean Peso and Pakistani rupee; in the case of the Rupee, the planned help of the International Monetary Fund has surely represented a stabilising factor.

National and international monetary policy authorities managed to avoid a contagion effect.

On the other hand, 2018 recorded an appreciation of:

• US dollar against the euro, supported by higher US growth and higher interest rates;
• two safe haven currencies (Swiss Franc and Japanese Yen), confirming the progressive increase in the degree of uncertainty during 2018.