Recently, currencies have experienced notable declines due to the interplay of several economic and political factors. These reasons vary between countries, but some common factors can be identified that contributed to this decline:
Global trade disruptions: Trade tensions between major countries, such as the trade war between the United States and China, have increased concerns about global economic growth. This anxiety has led investors to avoid risks, negatively impacting cryptocurrencies ($BTC $ETH $SOL ) and other high-risk assets.
Decline in investor confidence in emerging markets: Investor confidence in emerging markets has weakened due to escalating geopolitical tensions and the strength of the US dollar, leading to a decrease in demand for the currencies of these markets and a decline in their value.
Increased demand for foreign currencies in the parallel market: In some countries, a lack of supply and increased demand for foreign currencies in the parallel market have led to a decline in the value of the local currency. For example, in Algeria, the opening of car importation and increased Umrah trips have contributed to a rise in demand for foreign currencies, resulting in a decline in the value of the dinar in the parallel market.
High inflation rates: High inflation rates lead to a decrease in the purchasing power of the local currency, reducing its value against foreign currencies. In Iran, rising inflation and the decline in the value of the rial led to the dismissal of the Minister of Economy by Parliament.
Political and economic instability: Unstable political conditions negatively affect investor confidence, leading to capital flight and a decline in the value of the local currency. In Tunisia, a decrease in investments and consumption has exacerbated the economic crisis, affecting the value of the Tunisian dinar.
In contrast, there are countries that have managed to maintain the stability of their currencies or even enhance their value through effective economic policies. In Egypt, the increase in foreign currency reserves, direct investment flows, and rising tourism revenues have contributed to the resilience of the Egyptian pound against the dollar.
In summary, the value of currencies is affected by multiple factors, including local economic policies, political conditions, and the level of confidence in the economy. Understanding these factors helps to explain the decline or stability of currencies during different periods.
