Saturday, December 10, 2011

Today's Major Market Move: Syrian Pound Weakens 9.5% Against the US Dollar in December

The economic sanctions that have been imposed on Syria because of the regime's response to protests have begun to be reflected in the official exchange rate. I say official because the effects have already been felt for some time on the black market where the exchange rate is $1/S£60 (vs the current official rate of $1/S£54). The  9.5% rise in the official rate since Dec 1 makes the Syrian Pound the worst performing currency so far this month.

Click here to go to the live table.
For the year the Syrian Pound has weakened 14.9% which considering the circumstances, is a relatively moderate decline. They are the ninth worst performing currency, and none of those other eight countries are dealing with economic sanctions. Here's the list of the worst performers for 2011:

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According to a quoted analyst in this article from the Financial Times, the official rate has to get to 60 before the government is going to intervene.
Ayham Kamel of Eurasia, a consulting group, suggests that a rate of S£60 to the dollar, while pushing up prices of imported goods, is unlikely to be considered unacceptably high by the regime.

Mr Kamel points to the fact that the rate was around the $1/S£60 level the last time Syria was under intense international pressure following the assassination of Rafik Hariri, the then Lebanese prime minister, in 2005. “That’s within a reasonable range, given the pressure Syria is under,” says Mr Kamel. “From their perspective this is more of a long-term challenge, so they would like to preserve foreign reserves and intervene at a different time.”

Although analysts say devaluation is not yet a runaway phenomenon, the pound is expected to continue declining.

If it continues to decline at the same rate as the past week, the USDSYP cross will get to 60 well before the end of the year.

Click here to go to the live chart.

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