Foreign exchange market and short overview of the most traded currencies

Author: Vesna Trajkovska

Foreign exchange market in the RM represents a significant segment of the entire financial market and national economy and it is marked with the gradually growth. It is characterized with stable denar rate and enhanced income which in addition appeared as a result of the improved business climate, new capacities that are export oriented and foreign investments in the country. NBRM as a supporter of the commercial banks on a daily level is publishing data for the entire foreign exchange traffic that are obtained. For example the traffic in the first half of September 2018 (353 million euro’s) is approximately the similar as the total traffic in the previous two months in total (380 million euro’s). Such situation outcome as the result of the increased foreign trade exchange which in addition pull out larger amount of the currently present amount of foreign currencies, increased traffic of the foreign exchange market and commercial banks with NRBM.

Most important trade partner of RM is the European Union and the euro is the most traded currency that is used by the customers from the commercial banks.  The following next is the American dollar, Switzerland franc, British pounds and in smaller volume Australian dollar, Canadian dollar, Japanese jean, etc. Currencies traffic on the world stock markets are traded perpetually form Monday until Friday, except weekends, and they are demanded by several conditions, information and events that are published on a daily basis and are monitored through information systems by the bank dealers. (Thomson Reuters, Bloomberg). Fluctuation of the foreign exchange value course in the huge amount depends of the national inflation rate, unemployment rate, interest rate on deposits, price indexes, central bank decision, political factors, etc.

In September 2018, there are ten years after collapsing of the American Investment bank – Lehman Brothers that in theory was marked as the starting point of the economical crisis, which consequences can be felt even today. From 2008 banks, particularly the European ones gradually begin to reduce the interest rates and still operate in the zone of low and negative interest rates. Through the retrospective it can be seen that the same year ECB has lowered the interest rate from 4, 25 % to 3, 75 %. Such trends continued until 2016 when the interest rate was lowered till 0, 00%. Reducing the interest rate was one of the measures in the battle against low inflation in the euro zone. On the other hand the program for quantitative easing APP (Asset Purchasing Program) apropos net monthly purchasing of securities from the public and private sector was a none standard measure of monetary policy and its aim was to inject liquidity in the banking system. Almost all participants on the financial markets are expecting positive signal from the president of ECB Mario Draghi in the direction of increasing the rates. But according to his statements it won’t be happened before summer 2019, until APP program in the amount of 30 billion euro is active and till September 2018. After that (APP) will continued in the reduced form of 15 billion euro till the next of this year, when it will be abolished.

Events between USA and the other part of the world (particularly trade war between USA and China), fall of the lira and Turkey crisis are having their impact over movement of huge amount of currency pairs. Turbulence of so called emerging markets – EM Markets (example – Brazil, China, Russia, Iran, Turkey) caused converting of domestic currency in so called ‘’safe haven currency’’ or currencies that are considered as save during the time of crisis in the domestic economy. In this case American dollar and Switzerland franc which have noticed a bigger demand that other currencies leads to appreciation of the same. Separately, for these two currencies could be told that important factor for movement of the American dollar was FED decision on the level of the interest rates which this years was enlarged twice (from 1,50 % to 1,75 % respectively 2,00 %), and two more elevation are expected till the end of this year and three more in the duration of 2019 (www.reuters.com). With the rate of unemployment of 3.9 %, inflation rate close to target 2, 00 %, solid GDP growth, there are no indication that the dollar will fall until the end of this year.

When in January 2015, Switzerland national bank has abandoned minimal foreign exchange course, EUR –CHF – 1.200 and stopped to intervenes in the case of augmented demand of francs, was left foreign exchange course to format freely, when it grows for more than 20 % (to level EUR – CHF – 0,9900). Increased demand for francs in the previous months (like ‘’save haven currencies’’) didn’t challenge the bank to undertake the measures against high foreign exchange course, but on the contrary has accepted cause it positively reflect over deposits and payment balance. Negative interest rate at CHF is expected to continue until ECB didn’t intervene first in that segment of the monetary policy. It is not expected the currency pair EUR –CHF to deviates significantly till the end of the year from the level market from September.

There is no doubt that Britain exit from European Union that should happen in March 2019 is historical moment, but the pound is stabile and is still recovering after Brexit referendum. Now, the focus is on the agreement between EU and Britain that should be realized around middle of November. The market participants become so obsessed with Brexit that increasing the interest rate from the England Bank (0, 50 % to 0, and 75 %) didn’t cause any pound movements. The trend of moving the pair EUR – GBP currencies will depends from (none) achieving the agreement between the EU and Britain that should be finished till the end of the year. So it will appreciate if the agreement has achieved and will depreciate if the agreement wouldn’t sign.

Events of the foreign exchange market in the world could impact over the foreign trade traffic in the country and over the volume of the demand and offer of foreign exchange currencies and by that over middle exchange rate EUR – MKD (established in the boundaries of NRBM – 61,47 -61,72).

 

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