Young Research & Publishing Inc.

Investment Research Since 1978

Disclosure

  • About Us
    • Contributors
    • Archives
    • Dick Young’s Safe America
    • The Final Richard C. Young’s Intelligence Report
    • You’ve Read The Last Issue of Intelligence Report, Now What?
    • Dick Young’s Research Key: Anecdotal Evidence Gathering
    • Crisis at Vanguard
  • Investment Analysis
    • Bonds
    • Currencies and Gold
    • Dividend Investing
    • ETFs & Funds
    • Investment Strategy
    • Retirement Investing
    • Stocks
    • The Efficient Frontier
  • Investment Counsel
  • Dynamic Maximizers®
  • Retirement Compounders®
  • Free Email Signup

A Harbinger of Things to come in other Emerging Markets?

June 15, 2020 By Jeremy Jones, CFA

By Aon Khanisorn @ Shutterstock.com

Is Lebanon’s currency collapse a harbinger of things to come in other emerging markets? Chloe Cornish reports for the FT:

A dramatic collapse in the value of the local currency sparked protests across Lebanon on Thursday night, as the government and central bank struggled to stem the country’s worst economic crisis since its civil war.

The Lebanese pound, which has officially been pegged at L£1,500 to the dollar for two decades, fell to L£6,000 to the dollar on the parallel market on Thursday. Local media reported prices as low as L£7,000 to the dollar in some places, amid panicked trading. The pound started the week at L£4,000 to the dollar, falling 50 per cent on the parallel market in four days.

Nasser Saidi, a former central bank vice-governor, said there was little the government could do at this point to stop the slide. “This is a cash market, not your usual forex market. The central bank is no longer able to intervene.”

Demonstrators continued to block roads across Lebanon on Friday to protest against the government’s handling of the crisis as their purchasing power plummeted. Although the protests were largely peaceful, local media reported that fires had been started outside the central bank’s office in the northern city of Tripoli.

In response, prime minister Hassan Diab held an emergency cabinet meeting on Friday, attended by the central bank governor.

There are now multiple exchange rates in Lebanon’s chaotic currency market. The union of money changers has set its exchange rate at just under L£4,000, while commercial banks had been required to sell dollars for about L£3,000. The central bank issued a circular on Friday instructing commercial banks to sell at the union’s rate.

In light of the disparity between rates of exchange, the traders’ syndicate of north Lebanon announced a general strike on Friday while markets in Baalbek city also closed. In Beirut, many exchange houses — which have been taking rolling strike action — remained shut on Friday, leaving petrol stations and other informal traders as the main exchange venues.

Mr Saidi, the former central banker, said the volatile price swings were driven by four main factors: uncertainty among currency traders about government policy; the printing of currency to cover a fiscal deficit left by falling tax receipts; the economic impact of coronavirus; and panic in the exchange market in neighbouring Syria, where business people are anticipating the impact of new US sanctions next week.

Read more here.

Share this:

  • Email
  • Twitter
  • Facebook

You Might Also Like:

  • Emerging Markets Currencies have Worst Week Since 2016
  • Gold Begins to Shine
  • A Bet on Emerging Markets is a Bet on Asia
  • Author
  • Recent Posts
Jeremy Jones, CFA
Jeremy Jones, CFA, CFP® is the Director of Research at Young Research & Publishing Inc., and the Chief Investment Officer at Richard C. Young & Co., Ltd. Richard C. Young & Co., Ltd. was ranked #5 in CNBC's 2021 Financial Advisor Top 100. Jeremy is also a contributing editor of youngresearch.com.
Latest posts by Jeremy Jones, CFA (see all)
  • BULLWHIPPED? Inventory Overhang Could Slow Growth in Certain Sectors - May 20, 2022
  • MARKET TURNING: Canada’s Housing Market Turmoil - May 19, 2022
  • HORDING CASH: Funds Hold the Highest Level of Cash Since 9/11 - May 18, 2022

Search Young Research

Most Popular

  • MARKET CHAOS: This May Take Time, Here’s How to Prepare
  • PRICES SOAR: Diesel Shortage Could Cripple America's Economy
  • Your Survival Guy: “Sell in May, Buy After Labor Day?”
  • All-Powerful Money Managers Voting YOUR Money Targeted by Senate GOP
  • Institutional Investors Fall in Love with Oil, Again
  • COMMODITY CRUNCH: Will Tesla Buy a Cobalt Mine?
  • The Power of a Compound Interest Table
  • CRYPTO: Has the Fire Gone Out?
  • The Innovation Bubble Goes Bust
  • HORDING CASH: Funds Hold the Highest Level of Cash Since 9/11

Don’t Miss

Default Risk Among the Many Concerns with Annuities

Risk and Reward: An Efficient Frontier

How to be a Billionaire: Proven Strategies from the Titans of Wealth

Could this Be the Vanguard GNMA Winning Edge?

Cryptocosm and Life After Google

Warning: Avoid Mutual Fund Year End Distributions

Is Gold a Good Long-term Investment?

How to Invest in Gold

Vanguard Wellington (VWELX): The Original Balanced Fund

What is the Best Gold ETF for Investing and Trading?

Procter & Gamble (PG) Stock: The Only True Dividend King

The Dividend King of the North

You’ll Love This if You’re Dreaming of an Active Retirement Life

RSS The Latest at Richardcyoung.com

  • Joe Biden – Malicious, Incompetent, a Wannabe Left Wing Ideologue?
  • Jean-Pierre: Economy “Not Something that We Keep an Eye on Every Day”
  • Job Market Survival Advice for Graduates and for Those YOU Love
  • The Destructive Rise and Fall of BLM
  • What Would We Do without the Experts?
  • V4 Stands Against North African and Middle Eastern Invasion
  • BUY THE DIPS? Can You Catch a Ginsu Knife?
  • Florida: Enjoy Certain Freedoms and Individual Liberties
  • ENERGY FREEDOM ACT: Ted Cruz Introduces Bill for Energy Independence
  • Consequences of Biden Killing the Keystone Pipeline

About Us

  • About Young Research
  • Archives
  • Contributors

Our Partners

  • Richard C. Young & Co.
  • Richardcyoung.com

Copyright © 2022 | Terms & Conditions

 

Loading Comments...
 

    loading Cancel
    Post was not sent - check your email addresses!
    Email check failed, please try again
    Sorry, your blog cannot share posts by email.