Exchange Rates:Dollar On Steady Rise

The US currency has for some time now remained at FCFA 600 up from over FCFA 500.

Income earners in dollars in Cameroon have for some time been carrying blissful faces owing to the currency's steady rise in value. The US currency since September 2015 increased by FCFA 100 that is, FCFA 600 up from the previous exchange rate of 1 US Dollar to FCFA 500. As at yesterday January 18, 2016, the Dollar value was FCFA 602. Economists relate the gradual increase to "how well the U.S. economy is doing." Latest readings indicate that the U.S. Gross Domestic Product surged at a 5 per cent annual rate from July to September last year. The growth attracted investors, prompting an increase in the demand for the currency.

How It Happened

The crash in the price of oil, coupled with the boom in North American oil production helped boost Dollar value, explained Ariel Ngnitedem, a financial expert. He said; "This sterms from the fact that oil is priced in Dollars; so with the falling prices of oil, one can now buy more oil with the same amount of money contributed to the increase of the Dollar's purchasing power in relation to other currencies used for buying oil."

Impact On Foreign Economies

Given that Cameroon trades in Dollars, the immediate impact of the increase in value of the Dollar on the economy is mostly felt on her trade balance and foreign debt. "This will further deteriorate the trade balance because the increase of the amount of Dollars sent abroad for imports will outweigh the amount received for exports as the country imports more than it exports," stated Ariel Ngnitedem. The amount of foreign debt increases as related currencies increase. The portion of Cameroon's debt expressed in Dollars will increase at the same rate as the Dollar'.

Pathways!

The financial expert says in order to absorb potential shocks, policy and decision-makers should be cautioned about trade and indebtedness. He stresses that there is need to reduce or discourage imports paid in Dollars and promote exports in that currency; that is buy less in Dollars and sell more in Dollars to foreign customers. He also suggested that there is need to export more and import less from the U.S. and to other customers who pay in Dollars. Worth noting is the need to reduce indebtedness such as limiting Dollar-related new debts.