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Lebanon’s Currency Crisis Sparks Jitters

US dollar bills. AFP file photo
US dollar bills. AFP file photo
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Lebanon’s Currency Crisis Sparks Jitters

US dollar bills. AFP file photo
US dollar bills. AFP file photo

US dollar scarcity in the Lebanese market has forced some banks to withhold the foreign currency from everyday use.

Such banks have only allowed customers to withdraw in Lebanese lira all remittances sent in dollar from abroad, preventing them from withdrawing dollars from ATMs.

Banks also placed a ceiling on clients when withdrawing US dollars from their accounts.

The policies to block the dollar, particularly among merchants, drove people to trade their Lebanese liras at exchange firms for LL1,600 against the dollar, exceeding the daily LL1,507 benchmark set by the Central Bank.

Several sectors sounded the alarm this month, including an open-ended strike announced Thursday by Lebanese gas station owners due to a shortage in dollar reserves that has made it difficult to pay suppliers.

Gas stations in Lebanon are paid by customers in Lebanese pounds but must pay suppliers in US dollars.

But the syndicate of gas station owners suspended the strike on Friday.

Similar to gasoline importers, wheat importers say they cannot secure the requisite US dollars needed to pay for the import of wheat at the price set by the Central bank.

The series of strikes and warnings pushed the Central Bank to issue a statement on Thursday announcing that it would organize the funding of imports of wheat, medicine and fuel in dollars as of next Tuesday.

A leading merchant in Beirut told Asharq Al-Awsat that the Bank’s intervention could be the start of a fierce rationing on imports.

“Such measures are usually taken to curb the level of imports with an aim to bring down the trade deficit and the balance of payments,” the merchant said, adding that this policy would not solve the problem.

In a related development, a source said the visit of US Treasury Department Assistant Secretary Marshall Billingslea to Beirut early this week, came to warn Lebanese banks from selling US dollars to Syrians placed on the US sanctions lists.

Economic researcher Dr. Makram Rabah said that the dollar crisis aggravated in Lebanon after some merchants began buying dollars in the Lebanese black market to ensure fuel to the Syrian market.

“The Lebanese people are paying the price of some greedy merchants and the Bashar Assad regime, which is using Lebanon to evade sanctions,” he said.

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Business

ECB Policymakers Open Door to More Rate Hikes on Energy Risk

The logo of the European Central Bank (ECB) is pictured outside its headquarters in Frankfurt, Germany, April 26, 2018. REUTERS/Kai Pfaffenbach/File Photo
The logo of the European Central Bank (ECB) is pictured outside its headquarters in Frankfurt, Germany, April 26, 2018. REUTERS/Kai Pfaffenbach/File Photo
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ECB Policymakers Open Door to More Rate Hikes on Energy Risk

The logo of the European Central Bank (ECB) is pictured outside its headquarters in Frankfurt, Germany, April 26, 2018. REUTERS/Kai Pfaffenbach/File Photo
The logo of the European Central Bank (ECB) is pictured outside its headquarters in Frankfurt, Germany, April 26, 2018. REUTERS/Kai Pfaffenbach/File Photo

Two European Central Bank policymakers opened the door on Friday to further interest rate increases if a war-fueled rise in energy prices continues and pushes up other prices in the euro zone.

The ECB raised borrowing costs on Thursday for the second time this year and sources told Reuters policymakers expect further policy tightening in the months ahead, with a move possible as early ⁠as October.

The central ⁠bankers of Germany and Estonia acknowledged this prospect on Friday although they both stressed any move would depend on how oil and gas prices develop.

Bundesbank President Joachim Nagel said the ECB might need to raise rates to a level that mildly curbs the economy.

"I will not exclude that we have to ⁠go into the mild restrictive territory, but as I said, it's very much dependent on how the energy prices evolve, how the price picture is evolving over the course of maybe the next month," he told CNBC in an interview, according to Reuters.

The euro zone central bank increased its key rate from 2.25% to 2.50%, bringing it to the upper end of its estimated neutral range, which neither stimulates nor slows down the economy.

Money markets have started pricing in at least another three ECB rate hikes over the next ⁠year.

Ülo Kaasik, ⁠Estonia's central bank governor, said such expectations were "understandable" given the latest increase in fuel prices and the risk that food would also become more expensive.

"Recent developments in energy markets, for example, indicate the possibility that the price increase for gas and fuels will be much larger and last longer than expected in the forecast," he said in a blog post.

Slovenia's central bank governor Primož Dolenc also warned in a blog post about "rising energy and electricity costs in the autumn and winter months".

The ECB on Thursday slightly increased its projections for growth and inflation but these did not capture the latest energy price moves.

Business

Dollar Holds Gains, Yen Slips as Middle East Energy Shock Deepens

14 January 2020, Iraq, Baghdad: US dollar banknotes are pictured at a currency exchange service provider. (dpa)
14 January 2020, Iraq, Baghdad: US dollar banknotes are pictured at a currency exchange service provider. (dpa)
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Dollar Holds Gains, Yen Slips as Middle East Energy Shock Deepens

14 January 2020, Iraq, Baghdad: US dollar banknotes are pictured at a currency exchange service provider. (dpa)
14 January 2020, Iraq, Baghdad: US dollar banknotes are pictured at a currency exchange service provider. (dpa)

The dollar held near its highest levels of the past week in Asian trading on Friday as renewed fears of energy supply disruptions in the Middle East pushed up bond yields and oil prices.

The US dollar index, which measures the greenback's strength against a basket of six currencies, was trading flat at 99.084, after strengthening to its highest level since September 7 during the previous session. The rise followed the release of data showing US producer prices increased 0.4% in August, meeting market expectations as energy prices rebounded during the month.

"The safe-haven US dollar gained on risk-aversion flows, helped by higher energy prices that have lifted the chance of a Fed hike next week to 70%," said ‌Tony Sycamore, market ‌analyst at IG in Sydney.

Energy prices snapped a five-day gaining streak, with Brent crude ‌futures ⁠down 0.6% at $106.99 ⁠a barrel in Asian trade.

But both major benchmarks remained above the $100 mark earlier this week, with WTI futures surging across the threshold on Thursday for the first time since May 21.

Against the yen, the US dollar was down 0.2% at 154.105 yen and on track for its second consecutive week of declines, while the euro slipped 0.2% to 178.99 yen after the European Central Bank hiked interest rates on Thursday for the second time this year.

The Japanese currency regained ⁠some strength after data released on Friday showed wholesale inflation rose 7.6% in August ‌from a year earlier, bolstering the case for a rate ‌hike this month.

The Bank of Japan is set to raise interest rates next week, most likely by 25 basis points, and ‌may signal faster future tightening if price pressures heighten risks of an inflation overshoot, four sources familiar with ‌its thinking told Reuters.

The kiwi dollar was up 0.5% at $0.5827, retracing a selloff on Thursday that has put the currency on track for its third week of declines. New Zealand's 10-year government bond yields rose by 15.5 basis points to 5.06% on Friday, extending the biggest two-day jump in borrowing costs since last year's "Liberation Day" selloff.

"New Zealand seems to have been hit harder ‌than most in the latest leg of the bond market sell-off," said Thomas Mathews, head of markets for Asia Pacific at Capital Economics in Wellington.

The Australian dollar ⁠was up 0.2% at $0.7167.

Both ⁠the euro and the British pound were level against the dollar at $1.1609 and $1.3503, respectively.

PRESSURE BUILDS ON FEDERAL RESERVE

Markets are awaiting the release of US CPI later on Friday, one of the last major economic data points released before the Federal Reserve meets next week.

Fed funds futures are pricing an implied 71.1% probability of a 25-basis-point hike at the US central bank's next two-day meeting ending on September 16, compared with a 61.2% chance in the previous trading session, according to the CME Group's FedWatch tool.

Fixed-income markets remained uneasy after the US Treasury Department tripled the size of its long-dated bond repurchase, with a gauge of bond volatility rising to its highest level in a month. The yield on US 10-year government bonds was up 1.5 basis points at 4.957%.

"10-year US Treasury yields are within striking distance of 5%, as the markets have reassessed the Fed's path higher while term premium is appropriately hovering near pre-GFC levels," Barclays analysts wrote. "We remain of the view that bonds are not cheap yet and catalysts for a rally do not appear imminent."

In cryptocurrencies, bitcoin was down 0.2% at $77,094.41 while ether was 0.1% lower at $2,457.96.

Business

UK Economy Surprisingly Grows in July on AI Boost

Tourists walk in central London, Britain, 10 September 2026. EPA/ANDY RAIN
Tourists walk in central London, Britain, 10 September 2026. EPA/ANDY RAIN
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UK Economy Surprisingly Grows in July on AI Boost

Tourists walk in central London, Britain, 10 September 2026. EPA/ANDY RAIN
Tourists walk in central London, Britain, 10 September 2026. EPA/ANDY RAIN

Britain's economy grew unexpectedly in July, official data showed Friday, driven higher by the artificial intelligence sector.

Gross domestic product expanded 0.4 percent in the month, building on growth of 0.3 percent in June, AFP quoted the Office for National Statistics as saying.

A consensus of analyst forecasts had been for zero growth in July.

GDP output in the three months to the end of July also grew by 0.4 percent, the ONS said.

The data hands a boost to UK Prime Minister Andy Burnham and his finance minister John Healey ahead of the Labour government's budget update next month.

"Ongoing strength in the services sector was only partially offset by falls in both production and construction" in the three months to end-July, Liz McKeown, director of economic statistics at the ONS, said in a statement.

"Within services, computer programming was the largest contributor, continuing the strong growth seen throughout the year, with evidence that businesses involved with AI and related technologies helped to boost this sector," she added.