Article:
2023 has been an eventful year for currency markets, with some currencies experiencing stellar performances while others faced significant challenges. Among the major currencies, the pound emerged as a top performer, outpacing the greenback and most global currencies. At the beginning of the year, £100 could purchase almost $121, but it now buys just over $125. This strength in the pound has not only benefited travelers but also helped reduce the cost of imported goods and services, easing inflationary pressures.

The strength of the pound can be attributed to the relatively resilient British economy compared to the struggling eurozone, where Germany continues to face recession and stagnation. Higher interest rates implemented by central banks such as the Bank of England, European Central Bank, and Federal Reserve have attracted international investors, boosting the value of their respective currencies. However, the Bank of England has surpassed interest rate expectations, leading to a belief that rates will remain higher for a longer period.

On the other end of the spectrum, the Japanese yen and the Norwegian Krone experienced significant declines, both losing around 10% against the US dollar. Japan's central bank maintaining negative interest rates and Norway's government selling Krone to buy foreign currency, combined with a decrease in energy prices, contributed to the weaker performance of these currencies.

Meanwhile, Afghanistan witnessed a remarkable recovery in its exchange rate over the past year. The afghani reached its highest level against the dollar since early 2018, gaining more than 28%. This rebound, however, contrasts with the country's wider economy, which suffered a 25% crash in GDP following the Taliban's return to power. Aid flows and the ban on foreign currency usage have aided the recovery of the afghani, although the World Bank warns that any interruption in dollar flows could leave the exchange rate vulnerable.

The peso has been a strong performer, rising nearly 22% this year. This can be attributed to high interest rates and international investors seeking higher returns in a country with a 13.25% base rate set by the central bank. The peso is expected to continue its positive trend into 2024, with Goldman Sachs predicting overall strength. Import reductions, a thriving tourism industry, and foreign direct investment have also supported the currency's performance.

Showing surprising resilience, Albania's currency, the lek, climbed 13% against the US dollar this year, making it one of the world's strongest performers. The International Monetary Fund (IMF) praised Albania for its rebound in tourism and predicted robust economic growth for the country. Effective management of public finances and inflation control have also contributed to Albania's currency strength.

In contrast, Angola's currency, the kwanza, suffered a significant devaluation of more than 39% against the US dollar due to falling global oil prices and production problems. The government focused on repaying foreign debts rather than supporting the currency, resulting in a jump in inflation. Nigeria also faced currency devaluation, with the naira losing almost 44% against the dollar this year. The devaluation, part of a shock therapy program, aims to revive the economy by improving investment and trade.

Lebanon, however, found itself at the bottom of the list in terms of currency struggles. The country's government remains in default and devalued its official exchange rate by 90% in February. As a result, Lebanon's currency is down 89.9% against the US dollar for the year. Without effective domestic leadership and significant reforms, prospects of sustained recovery for Lebanon's economy remain bleak, according to experts at Oxford Economics.

Overall, the currency markets of 2023 have witnessed a mix of success stories and challenges. As economies dealt with various factors such as interest rates, government policies, and global economic conditions, exchange rates shifted, affecting travel, inflation, and trade. Looking ahead to 2024, uncertainties and opportunities will continue to shape the paths of different currencies.