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SWIFT: euro shares in international settlements decreased for the second year in a row by the end of December due to the instability of the current euro exchange rate

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At the end of December 2022 the share of the euro in international settlements fell for the second year in a row, this time to 36.34%. This happened due to the instability of the current euro exchange rate. For comparison, during the same period in 2020 this figure was 36.7% and in December 2021 – 36.65%, statistical data of the International Interbank Information and Payment Transmission System (SWIFT) say.

At the same time, the U.S. dollar showed the opposite dynamic by the end of 2022. The U.S. dollar’s share of transactions in December increased year-on-year to 41.89%, the note said.

“The euro’s share of international settlements in December 2022 was 36.34%. Previously, the share was 36.65% at the end of 2021 and 36.7% in December 2020. The share of the U.S. dollar in international settlements from December 2021 to December 2022 increased from 40.51% to 41.89%. The volatility of the euro exchange rate chart is to blame”, – says the article.

Following the results of 2022, the British pound sterling closed in the top three of the world’s currencies regarding frequency of use in international calculations. Its share compared with December 2021, increased over the past 12 months from 5.89% to 6.08%.

Earlier we reported that the dollar is weakening against the euro, the yen and the pound sterling.

Forex

Brazil and Argentina currency: countries want to create their own “euro”

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A new Brazil and Argentina currency will soon appear on the Forex market? Brazilian President Luiz Inacio Lula da Silva and Argentine President Alberto Fernandez announced in a joint article that they had decided “to intensify discussions of a common South American currency, which can be used to serve both financial and trade flows, reduce transaction costs and foreign economic vulnerabilities.

What’s known about the initiative

Back in 2019, then-Brazilian President Jair Bolsonaro said that Brazil and Argentina were preparing to take the “first step” toward “the dream of a single currency.” At the time, the idea was met with skepticism in Brazil.

In 2021, Brazilian Economy Minister Paulo Guedes said that in a potential currency union, Brazil could take on the role played by Germany in the eurozone. But it is unlikely that the sur currency could fully compete with the euro and dollar.

The sur currency would not replace the real and Argentine peso — at least at first — and would be used in parallel with them, the Argentine publication Perfil specifies.

Brazilian Finance Minister Fernando Addad stressed on Sunday, January 22, that the two countries have a new tool to strengthen mutual trade and do not intend to give up their own currencies. According to Bloomberg, talks are at a very early stage and no target date has been set. The common market arrangement that groups Brazil and Argentina, should be thus stimulated.

Why a “common currency” is needed

Explanations from Brazilian and Argentine officials show that there is no question of creating a currency union similar to the eurozone. “We need something that allows us to increase bilateral trade, given that Argentina is one of the countries that buys finished goods from Brazil and our exports there are declining,” the head of the Brazilian Ministry of Finance pointed out (quoted by Bloomberg).

In December 2022, Argentina’s Buenos Aires Herald website reported, citing sources, that “the focus would be on creating a common currency,” a concept that differs from “a single currency because it does not involve abandoning the national currencies of Brazil and Argentina.” Such a currency would allow Argentina to buy Brazilian goods without having to spend dollars from reserves, the publication argued.

Earlier we reported that Japan and China gave up first place to the EU as the world’s largest importers of LNG.

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Japan and China concede first place to the EU as world’s largest LNG importers

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The balance of power among the world’s largest LNG importers in 2022 has changed completely – with a huge gap to first place going to the European Union as a collective buyer, the second place was occupied by Japan, and China from first place in 2021, moved to third.

EU

According to Gas Infrastructure Europe, the EU used a total of 98 million tons of LNG in 2022 (127 billion cubic meters of gas after gasification), which again makes it the cumulative largest LNG importer in the world.

Japan

Japan cut LNG imports by 3 percent to 71.997 million tons in 2022, the country’s Finance Ministry said Thursday. The average price of LNG imports in 2022 has almost doubled to $657 per thousand cubic meters after $384 in 2021. Meanwhile, the spot price in the region (JKM Platts index) was at $1,214 per thousand cubic meters in 2022.

China

LNG shipments to the PRC in 2022 are expected to be about 63 million tons, which, with any actual result of customs statistics for December, is significantly below the volume of Japanese purchases.

For the first 11 months of 2022, China imported 65.935 million tons of LNG, down 8% from January-November 2021. December could add up to another 7 million tons.

The main reason for the decrease in energy imports in 2022 by 2021 is the imposition of strict restrictions to prevent the spread of coronavirus infection.

Chinese buyers against the background of anti-cooking restrictions at home and the frenzy of demand for LNG in Europe skillfully maneuvered in the spot market, reaching the optimal price of gas supplies. After Europe filled its UGS to capacity, PRC buyers took advantage of the price drop and ramped up purchases at the end of the year.

Earlier we reported that Europe’s economy was surprisingly resilient.

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ECB: european economy today surprises with its resilience

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The European economy today is performing better than expected, despite record inflation and the energy crisis, said Mario Centeno, head of Portugal’s central bank and a member of the European Central Bank’s (ECB) Governing Council. This is positive news for the euro.

“European economy 2023 surprises us quarter after quarter,” he said during an event at the World Economic Forum in Davos organized by Bloomberg.

“The fourth quarter in Europe is likely to be positive as well. We may also get a surprise in the first half of the year,” Centeno added.

Some analysts are also showing increased optimism about the eurozone economy. For instance, a week ago, Goldman Sachs (NYSE:GS) improved its forecast for the currency bloc’s GDP for 2023 and now expects growth of 0.6% instead of the 0.1% decline previously expected.

In the meantime, the ECB will continue its fight against inflation, Centeno noted.

That fight lies in the sharpest key interest rate hike in the regulator’s history. The rate is now at 2 percent, and analysts polled by Bloomberg expect two 50-basis-point hikes, in February and March, and another 25-basis-point hike in May or June.

Earlier, we reported that inflation slowed to 9.2% in the eurozone in December and 10.4% in the EU.

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