Irish and EU exports are to benefit in 2016 from a strong US Dollar against the euro, the European Commission’s latest Short Term Outlook suggests.
Oil prices, geopolitical tensions and economic growth factors continue to drive the US Dollar to strengthen compared to most currencies.
The weakening of the euro against the US dollar has helped EU competitiveness, and the outlook for 2016 suggests a similar trend.
Looking at Ireland, in 2015 the euro weakened 16% relative to the Dollar which boosted Irish exports by around €950m.
In December alone, the Bord Bia Export Performance and Prospects report found that the euro was over 12% weaker against the Dollar – again boosting Irish exports.
Bord Bia says that anticipated economic developments in regions such as New Zealand, Russia and China over the next 12 – 24 months suggests ongoing weakness of the euro relative to the US Dollar.
This should help to maintain competitiveness of Irish exports, however it will also have the impact of pushing up import prices for inputs and raw materials, according to the report.
Currency fluctuations
The Commission’s outlook found that currencies of other high income countries (Canada, Japan, Australia, New Zealand and so forth) have also depreciated against the US Dollar in similar proportions as the euro since 2013.
In emerging economies, currencies generally have depreciated against the US Dollar and the euro: some deeply like the Ukrainian hryvnia, the Russian ruble, the Argentinian peso and the Brazilian real.
Both in Argentina and Brazil, currencies are expected to further depreciate against the US Dollar in 2016, boosting their export capacity, according to the outlook.
By contrast, some Asian currencies stood close to the Dollar (e.g. in China, Thailand and India), which the outlook found to favour their import potential.