Rabat – The Moroccan dirham appreciated by 1.62% against the US dollar and depreciated by 1.04% against the euro between 20 to 26 October, according to data from the country’s central bank, Bank Al-Maghrib (BAM).
The drop in the Moroccan dirham against the euro is the direct result of a consolidating euro. Over the past five months, the euro has been trading higher relative to the US dollar.
However, on Thursday, as the European Central Bank (ECB) prepared to announce its second interest rate hike to 1.5% – its highest level since 2009 – to combat rising inflation, the euro dropped 1% against the US dollar amid speculations about a similar near-term rise in interest rates in the United States.
Higher central bank interest rates translate into higher returns for investors, triggering a rise in demand for the currency, hence pushing its value higher.
The recent gains of the euro against the dollar are unlikely to last for long, market observers speculate.
The United States’ central bank, the Federal Reserve, is set to meet next week to review the country’s monetary policy. Should the Fed decide to drive interest rates higher, it would automatically bolster the value of the dollar as demand rises.
While developing countries opt for monetary tightening measures to tame inflation, the effects might be devastating to emerging economies’ currencies, experts warn.
A consolidating dollar and euro draw investors away from emerging countries. A strong dollar equally means that the existing debt of developing countries would become more expensive, and it could tip some of these countries into recession as economic growth slows downs.
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