Today's Major Market Move: Syrian Pound Weakens 4.6% Versus the Dollar this Week

Economic hardships have a tendency to motivate people into action that would otherwise remain passive bystanders. The ultimate undoing of the current Syrian regime may very well be caused by this:

Click here to go to the live chart.

For the uninitiated, that's a chart of the US Dollar / Syrian Pound cross. Up until September, 2011 the Syrian Central Bank kept the Syrian Pound pegged to the Dollar in a fairly narrow band.  After September, strains became evident as the central bank allowed the currency to break outside of the band (or one could argue they were forced to by the markets).

We previously posted about Syria's currency on December 10, 2011 and at that time we noted how the black market rate for Syrian Pounds had been quite a bit higher (around 60 Pounds/Dollar) for some time. As the protests and international sanctions took their toll on the economy, the pain was reflected in the de facto exchange rate, even if the government and central bank have been slow to officially acknowledge the effects. The growing desperation of the government is becoming more evident as the regime attempts to exert more strict control over currency flows. From the Syrian Enterprise Business Center:

The Central Bank of Syria has increased the selling prices of the Syrian Pound relative to the US Dollar to above 57 Pounds as it seeks to clamp down on the black market...

At the same time, the Central Bank is trying to decrease demand for foreign currencies. Last week it asked all state administrations to provide it with a list of the fees, taxes and other payments they collect in foreign currencies from households, businesses and other parties, and to justify why these payments are not made in the local currency.

The objective of the decision is to trace all the operations done in foreign currencies and try to reduce them so that in turn demand for foreign exchange in the market diminishes.

The Central Bank has already limited significantly the amount of foreign currencies it makes available to private individuals and companies.

Until last October the Central Bank provided foreign currencies to all import traders that would require them to finance their imports, through the local bank these traders deal with. In October, the Bank announced that it would stop doing so except for a few key food items.