Browsing: US dollar

 

It is 1985, the US dollar is unbeatable, it is the reigning champion of the World’s heavy weight currencies. The beefed up greenback is knocking out all challengers, it has to be stopped, reasoned economists from the other major World economies.

And so, that year finance ministers from the US, Germany, Japan, France, and the UK all inked an agreement to devalue the dollar, even the US was in on the agreement, laughing to the bank of course.

The decision to ‘intervene’ became known as the Plaza Accord, a joint agreement amongst central banks all around the World (including the US) to tinker with currency markets in a bid to put the dollar in check.

  • The US dollar up 17% and rising
  • Federal Reserve monetary policy behind rising dollar
  • Strong dollar weighs heavy on Africa’s debt servicing

So with the heavy weight dollar playing Muhammad Ali again, almost half a …

Because of erratic economic policy, Zimbabwe continues to be the sick man of the Southern African Development Community (SADC) region.

The country perennially goes from one economic crisis to the next. Presently Zimbabwe is battling with resurgent inflation after managing to rein it in from the hyperinflationary levels reached in the years 2019 to 2020 and during the early months of 2021, peaking at over 837%.

Currently, Zimbabwe’s inflation stands at approximately 257%. Conventionally, the origins of inflation have been and always will be excessive money supply that outstrips the rate of growth in an economy resulting in too much money chasing too few goods and services. In the case of Zimbabwe, the inflation malaise was compounded by the fact that the economy is virtually stagnant, growing only marginally.

  • Zimbabwe’s economic policy has been erratic.
  • The government in Zimbabwe has recently adopted a scorched earth policy against inflation by tightening

The United States dollar has rallied against major world currencies since the beginning of the year.

According to the World Bank, the greenback has appreciated by as much as 11% since the beginning of 2022. Several major currencies have lost ground to the US dollar and this development has serious implications for emerging markets, many of which are in Africa.

  • United States dollar has appreciated in value since the beginning of the year as investors demand them relative to other currencies, World bank reports
  • The Federal Reserve has been increasing interest rates, and this has led to investors piling into the currency which they perceive to be safer than the more esoteric emerging market currencies that have shown to be more volatile
  • World Bank warns that a strong United States dollar environment will adversely affect Africa and emerging market economies. This is because of fundamental and structural economic vulnerabilities

The …

  • The United States (US) dollar has been for decades, used as a fixed-based currency because it’s used in most foreign markets
  • The Kuwaiti dinar is the strongest currency in the world followed by the Bahrain dinar, Omani rial and Jordan dinar
  • The US boasts the strongest economy globally with an estimated GDP of US$20.94 trillion

The United Nations (UN) recognises about 180 currencies in the world as legal tender. Have you ever asked yourself which one is the strongest?

The United States (US) dollar has been for decades, used as a fixed-based currency because it’s used in most foreign markets.

The strongest currency, therefore, is one that yields the smallest exchange against the dollar. This means that the strongest currencies are those that are more expensive than the US dollar.

Read: Shift from the dollar with Pan-African Payment System launch

Many factors determine a currency’s value. These include inflation and
  • Before Mnangagwa’s statement, the Zimbabwean currency was officially valued at 165.94 to the US dollar, but it was trading on the black market at a rate ranging from 330 to 400 to the dollar
  • Investigations found that many enterprises are simply borrowing significant sums of Zimbabwe dollars, which they then channel into the parallel market to acquire US dollars
  • The president proposed issuing an order to compensate account holders who lost the value of their assets when the country de-dollarized in 2019

Zimbabwe ditched its depreciated currency in 2009, preferring to utilize foreign currencies, notably the US dollar. Mnangagwa’s administration revived the native currency in 2019 to float alongside international currencies in the economy, but the local currency continued to lose value.

As a result, President Emmerson Mnangagwa has instructed banks to cease extending loans to the government and private sector departments, claiming that the unprecedented action was intended to

  • India has bought oil from Russia in rupees-roubles and not US dollars
  • India is a nuclear power whose population is 1.3 billion people which makes it the world’s third-largest importer of oil
  • The US’ dominance and monopoly of the global economy is via the petrodollar

On March 18, 2022, reports surfaced online that India had bought oil from Russia but the interesting bit is that the transaction was discounted and in rupees-roubles, not US dollars!

This is a story that will probably not make it to be on prime news. That India has bought oil from Russia in rupees should sink in and alert the world to what is happening covertly.

What is important to note is that India is a nuclear power whose population is 1.3 billion people which makes it the world’s third-largest importer of oil. The amount of oil bought from Russia is three million barrels but …

  • Copper increased the 2021 trade surplus to 73.4 billion kwacha (US$4.4 billion) as of November 2021, a 76 per cent increase over the previous year.
  • The country intends to move from one million metric tonnes production to three million metric tonnes every year for the next decade.
  • Copper prices stood at US$9,324.71 per metric tonne as at November 2021.

Zambia’s currency, the Kwacha, has recorded its highest value since 2005. It had gained 27 per cent against the US dollar by the end of 2021.

Its success has been linked to the optimistic and entrepreneurial approach of President Hakainde Hichilema’s government, which was elected to office in August this year.

Investors are banking on the possibility of the new government securing a bailout agreement with the International Monetary Fund on debt restructuring negotiations.

Read: China’s strategy for Africa’s minerals, electric cars

This year has seen the currency’s best annual performance …

  • The vice president masterminded the palace coup that overthrew long-time ruler Robert G. Mugabe and installed the current president.
  • The Reserve Bank of Zimbabwe (RBZ) has published a statement naming and shaming individuals in the illegal foreign exchange market.
  • Zimbabwe took the decision to demonetize its defunct currency in favour of a basket of foreign currencies led by the US dollar.

There are several activities that pose a serious and real threat of physical harm when conducted in Zimbabwe.

These include political activism, especially if you are anti-establishment or anti-government. If an individual is an activist for human rights, he or she is more likely to have brushes with the law the way a common criminal would.

It is tragic but true.

Added to this list are the illegal foreign exchange dealers. The government has determined to crack down on these individuals whom it blames for sabotaging the economy …

  • Zimbabwe did not have a parallel market for foreign exchange in the years running from 2009 to around 2016.
  • Zimbabwe is heavily reliant on imported products and expends more foreign currency than it can afford.
  • Demand pressure has contributed to the fall of the Zimbabwe dollar resulting in general inflation.

To dollarize or not to dollarize?

This question has robbed monetary authorities of sleep as the Zimbabwe dollar falls precipitously on the parallel market.

Zimbabwe did not have a parallel market for foreign exchange in the years running from 2009 to around 2016.

It all began with the introduction of a surrogate currency that was fallaciously pegged at par with the United States dollar. The authorities initially posited that the surrogate currency was supported by a loan facility extended by the Africa Export-Import Bank (Afrexim Bank).

This loan it was said underscored the parity of the currency. It did not …

  • PAPSS will enable instant, cross-border payments in local currencies between African markets
  • PAPSS is set to boost intra-African trade significantly by simplifying cross-border transactions and reducing dependency on hard currencies
  • PAPSS is a collaboration between some of the continent’s leading institutions

In September, the African Export-Import Bank (Afreximbank) and AfCFTA Secretariat announced the operational roll-out of the Pan-African Payment and Settlement System (PAPSS).

The revolutionary Financial Market Infrastructure is meant to enable instant, cross-border payments in local currencies between African markets.

PAPSS is set to boost intra-African trade significantly by simplifying cross-border transactions and reducing dependency on hard currencies for these transactions. The system also underpins the implementation of the African Continental Free Trade Area (AfCFTA).

Read: Good week for Kenyan SMEs with American deals signing

The full implementation of PAPSS will serve as a continent-wide platform for processing, clearing and settling intra-African trade and commerce payments. This will leverage …