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Mixed year for the pound

21st August 2017 Print

The pound has had a mixed performance against the world’s major currencies over the past year1, according to latest research from Lloyds Bank Private Banking. During the last 12 months the pound declined in value against 40 of the 60 currencies analysed and increased against 20. This shows an improvement from the period January – December 2016, where the pound was out performed by 56 of the 60 currencies analysed.

Zambian kwacha and the Iceland krona best performing currencies against the pound

While the strong Euro has understandably been making the headlines, it’s the Zambian kwacha and Icelandic krona that have been the top performing currencies against the pound over the past year, rising by 14%. This marks a huge turnaround as just two years ago, the kwacha was the worst performing currency against the pound. Improving economic conditions and improved agricultural output has led to increased investor confidence in the Zambian economy and a stronger kwacha. The Icelandic krona declined during the financial crisis in 2008. However this led to an increase in exports and tourism, which, along with a growing economy, has helped drive up the value. The Mozambique metical (11%), Russian rouble (10%), Serbian dinar, Poland’s zloty and Hungarian forint (all 8%) have been the next best performers.

Soaring inflation hits the Egyptian pound 

The worst performing currency in the past year was the Egyptian pound, which has fallen in value against the pound by 100%. The Egyptian pound was devalued towards the end of 2016 in order to stabilise the economy. As a consequence, inflation, which was already high, has been averaging 30% this year.

The Uzbekistan som is the next worst performer, falling by over a third (36%) in the past year. The next largest falls ware the Turkish lira and Argentine peso which have fallen in value by 17%.  Security fears and a slowing economy, including high inflation, have helped drive the Turkish lira to lows in 2017 not seen in the last decade. The Argentine peso has, for a number of years, suffered from a contracting economy and high inflation.

Those who like their long-haul exotic holidays will find their money goes further in Sri Lanka and Malaysia where the rupee and the ringgit have fallen by 5% and 4% respectively since July 2016.

Pound underperforms 11 of the 16 currencies in the G202 group of economies 

Amongst currencies in the G20, the pound has seen the largest fall against the Russian rouble (10%) over the past 12 months. The next largest falls have been against the euro (6%) and the South African rand (5.5%). The Russian rouble has strengthened on the back of rising oil prices in the latter half of 2016, a significantly lower inflation rate and improved relations with the US. Stronger economic growth in the EU zone has helped drive the euro to higher levels. A significant narrowing of South Africa’s current account deficit caused by slowing imports and firmer exports following the recovery in commodity prices have been key factors in driving up the rand.

The pound has also fallen against the Australian dollar, Mexican peso, Indian rupee and Canadian dollar by 5% to 5.5% in the past year.

The pound has been virtually unchanged against the US dollar, but has grown against Japanese yen (7%), the Indonesian rupiah (1%) and the Chinese renminbi (0.4%).

Peter Reid, Expatriate Banking Director at Lloyds Private Banking, commented:

"Sterling has had a very mixed performance over the past year. Understandably the pound has appreciated against those economies that are facing problems, especially high and persistent inflation such as Egypt, Uzbekistan, Turkey and Argentina.

“UK travellers going on long-haul destinations, such as the Philippines, Sri Lanka and Malaysia will have benefited from the further strengthening of the pound. However those going to parts of south east Africa and Eastern Europe won’t see their money go far. 

“British expats living and working abroad are also seeing a mixed picture. Those earning a salary in the most popular destinations of Australia or Spain are seeing an increase in their spending power on their return to the UK.”