Q4 2016 currency fluctuations – Egypt, Venezuela and the UK worst; Japan and Brazil best against the $US

The value of world currencies continued to shift significantly against the $US in Q4 2016. My chart shows the change how much more or less a $US would buy you. In particular:

  • Brazil fared best, gaining by 14.2% – together with Chile (5.1% better) and Russia (3.9%), perhaps indicating the improving fortunes of oil producing countries now that supplies are beginning limited, but more definitely some recovery from a long periods of decline.
  • Japan came in second with the Yen worth 11.4% more in $US terms, underlining its healthy on-going economic recovery.
  • The Euro lost 1.5% of its value, making it reasonably stable in comparison with other large trading blocs.
  • Egypt continued to devalue its Pound, seeing the greatest decline (82.9%) of all currencies.
  • Venezuela also did badly – losing 58.7%.
  • The uncertainty of Britain’s decision to leave the EU in its referendum at on June 25th has resulted in a very significant 20.4% decline in the value of its Pound, which has continued into 2017.

Why does this matter for business planners in the IT and Communications industry? Although it takes some time to filter through, prices for imported equipment and services (such as PaaS and IaaS run from a different country) will rise in local currencies in those countries with worsening exchange rates, since most world prices are based on the US dollar; vice versa prices should decline in those countries with improving rates. Getting a good handle on how to extract currency fluctuation from historical periods is essential when paying regional bonuses to sales forces, assessing your relative success at a country level and making more accurate forecasts. For more on how to do this, see my previous post. I use OANDA as a source, modelling all of my data using quarterly average exchange rates.

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