During 2018, the Euro strengthened against all major currencies excluding the Japanese Yen, the US Dollar, the Mexican Peso and the Swiss Franc. The chart below shows the percentage variation of the quotations from the beginning to the end of 2018.
The Japanese Yen gained 7.03% against the Euro. The international tensions caused by the US-China trade war strengthened the Japanese currency, which in the second half of the year performed well. This second half growth helped to recover the value that was lost the previous year, while also confirming the role of “safe havens”.
The US Dollar in 2018 appreciated 5.11% against the Euro. The United States experienced strong economic growth with an annual GDP growth rate of 3% while inflation dropped to 1.9%. The Fed has consequently increased interest rates by 4 times. The trade war imposed by President Trump have negatively impacted the growth forecasts of several countries, including China and Europe. These actions, however, strengthened the dollar against Chinese currency.
The Mexican Peso gained 4.6% against the European currency. GDP grew 2.5% and the central bank pushed rates to 8.25%. The rate increase was meant to attract foreign investment and offset domestic political weakness. The Swiss Franc gained 3.6% against the Euro. Switzerland’s PMI Manufacturing Index is 57.8, second in the world only to Denmark in December.
Among the weakest currencies, the Argentine Peso depreciated by 92%. Argentina continues its period of deep crisis. GDP has dropped 3.5%, unemployment reached 48%, and restrictive monetary policy has doubled interest rates from 30% to 60%.
The Turkish Lira’s dropped 33.3%. The macroeconomic situation remains worrisome. High inflation (21.6%), decrease in growth (+ 1.6% compared to + 5.3%), and low manufacturing PMI (44.7) have all contributed to the steep drop in the Lira.
The devaluation of the Ruble (down 15.32%) is due mainly to the US tariffs on steel and aluminium imports. The Brent price has dropped 20%, only making matters worse.
While the Brazilian Real dropped 12.5% on the year, the currency strengthened after implementation of new president Bolsonaro’s economic program. The program led to new reforms and economic growth and was judged in a positive way by financial markets. The devaluation of the currency led to growth in exports at the tail end of the year.
Also, the Sterling dropped 0.58% in 2018. Bad management of the Brexit negotiations have been devaluing British currency, as the outlook remains uncertain.
The Chinese Yuan lost half a percentage point (-0.56%) compared to Euro. The fall is due to the commercial war triggered by the US, which introduced new duties on Chinese imports. The data on exports (annual) and imports (annual) have decreased by 4.4% and 7.6%, respectively. The trade balance surplus marks the highest value since the beginning of the year (57.06B $), yet decreases were still sharp.
Analyzing the last 7 years, from 2011 to 2018, the currencies that appreciated most compared to the Euro were:
– the US dollar which increased 14.7%;
– the Chinese Yuan: + 10.5%;
– the Swiss Franc: + 9.6%.
Conversely, the currencies that experienced the greatest loss were:
– the Argentine peso which lost 713%;
– the Turkish Lira: -191%;
– the Brazilian Real: -101%.