FX Money Moves – Currency Makeovers

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Keeping a weather eye on foreign currency exchange rates is fast becoming a part of day-to-day living for expats.

The International Monetary Fund adding the Chinese yuan to the Special Drawing Rights bundle of main currencies has stolen the thunder of many other currency changes in recent weeks.

The move is good for expats in China and the Asia Pacific, as the Chinese government has promised to release the shackles on the yuan and allow the currency to float freely in the future.

This will give a more realistic price against the US Dollar and the Pound over time.

But the yuan is not the only currency to get a makeover in recent weeks.

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Silver lining for Argentina?

Argentina may be named the land of silver, but the country is far from luxuriating in riches after years of economic mismanagement that have seen raging inflation and devaluation of the peso.

Now a new president is in power. Mauricio Marci is a new broom promising to sweep away the popular but economically suicidal policies of the previous government, which defaulted on international loans.

Marci has announced intentions to relax the central bank’s grip on the value of the peso and let the currency float.

The problem is Argentina will need to prop the peso with huge amounts of foreign currency reserves that are already depleted – a move which could trigger even higher inflation. The cost of living is officially rising at more than 14%, but many suspect that is a figure heavily massaged by the government.

Commodity exporters take a hit

Besides China and Argentina, other currencies expats need to watch are those of commodity exporting countries.

Falling oil, gold and mineral prices are badly affecting the exchange rates of these currencies – and most are home to large numbers of expats providing the skills to run the organisations extracting the commodities.

Surinam has devalued the dollar – joining the ranks of Nigeria, Brazil, Azerbaijan, Angola and Zambia, who have seen revenues shrink as demand for their exports has shrivelled.

Expats with remuneration paid in US dollars should be fine and see their spending power boosted, but those paid in local currencies should review their contracts.

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