Rabat : After the election of Donald Trump as the president of the United States of America, the value of dollar increased markedly. This Wednesday, however, it registered a sharp drop against the Moroccan dirham (MAD), the euro, and other currencies.

The greenback dropped 1.4 percent against the Japanese yen and slipped 0.5 percent against the euro. US stock markets were also suffering, with many major global indexes declining by 1 percent or more, Morocco World News reported.

The dollar’s decline followed an ugly trading session in the US on Tuesday. The dollar index, which measures the greenback against a basket of rival currencies, dropped to territory unseen since just after Trump’s election in early November.

While this bad news for Americans, it is good for the Moroccan dirham. Since January, the dirham has appreciated by 5 percent against the dollar, the latter reaching its lower rates against the Moroccan currency since 2014, according to Bank Al Maghrib’s report.

This drop in the dollar is quite favorable for the Moroccan economy since raw materials are denominated in dollars. The few listed companies that charge a part of their turnover in US dollar, especially in the technology sector, better have covered their costs. Otherwise, the adverse currency effects could be harsh.

Throughout the last months, the dirham gained in value against the dollar. On the Casablanca Stock Exchange, traders display the dollar at MAD 9.4350, compared to over MAD 9.8000 by late June, when the Moroccan central bank’s governor was warning against speculations.

Abdellatif Jouahri was furious against the commercial banks, whose speculations on a probable currency devaluation resulting from the dirham liberalization reform spread like wildfire. As a result, operators rushed to buy foreign currency, draining MAD 44 billion out of the national foreign currency reserves in a matter of one month.

The commercial banks managed to win the first battle, forcing Bank Al-Maghrib to delay its exchange rate regime reform scheduled for July. However, with the current acute drop in the dollar, they took a hard hit. The operators who rushed to cover themselves against a devaluation of the dirham compared to the greenback are for the moment the sole losers.

On the other hand, the euro is benefiting from the weakness of the dollar and the US’ political confusion. Moreover, the European Central Bank is far from reducing its balance sheet, which makes the euro even more profitable compared to the dollar.

The euro is thus advancing against other currencies, including the dirham. This Wednesday the traders showed that the EUR/MAD had reached MAD 11.1590 against an average level less than MAD 11 last June. Now, those who have covered themselves in euro amid the flexibility of the dirham reform are quite the winners at the moment.

Finally, on the Casablanca Stock Exchange, the Masi index, which ended July with an annual performance of 4.78 percent, posted a performance of 0.56 percent in euros and 11.79 percent in dollar terms.

The foreign exchange market is among the most volatile and is strongly influenced, inter alia, by macroeconomic indicators in Europe and the United States. The evolution of the USD/EUR parity will be guided by the turn of the monetary policies of the European Central Bank and the US Federal Reserve.

The ECB, which has hitherto led an accommodating monetary policy to support growth, is slowly moving towards a reorientation of its strategy as the Fed before it. In the short term, the euro could still strengthen against the dollar and approach 1.18, analysts expect.

—SM/IINA