Load the BIS data

All of this charts in this notebook are from this BIS dataset, which I have manually cleaned. We start by showing what the dataframe looks like, so that we know what we're working with.

Source: https://www.bis.org/statistics/xrusd.htm?m=2675

Chart 1: The British Pound

We start with the British Pound simply because it has the longest data series from BIS on its exchange rate versus the US dollar. It is remarkable that from the end of the War of 1812 until the start of World War II in 1939, the GBP/USD exchange rate spent most of its time in a tight range of around 4.85 US dollars to the Pound with three notable exceptions:

  1. During the American Civil War, the US dollar devalued to over 12 dollars to the pound in 1864, then recovered back below 4.9 at the end of reconstruction around 1877
  2. After World War I, from 1920-21, the pound devalued to less than 4 dollars before returning to 4.8 in 1926, and
  3. In 1931-32, as the Great Depression was starting and US stock market was bottomming out, the pound again fell below 4 dollars before its final return above 4.8 in 1933-1939.

The pound then spent the 1940s at a very stable exchange rate of around 4 dollars, in the middle of which was the 1944 Bretton Woods Conference (https://2001-2009.state.gov/r/pa/ho/time/wwii/98681.htm), where several countries agreed to try and maintain fixed exchange rates to the US dollar, which in turn was pegged to 1/35 ounce of gold until 1971.

Chart 1A: The British Pound Since 1950

Oddly enough, it was only a few years after the start of Bretton Woods that the pound saw its next major devaluation from around 4 dollars to around 2.8 dollars in late 1949. I will use this point to mark 1950 as the start of the "modern era of the British Pound", which we zoom in on in this next chart. We see that the GBP/USD rate of 2.8 was maintained from the end of 1949 until the Harold Wilson devaluation to 2.4 in 1967 (https://www.nationalarchives.gov.uk/cabinet-office-100/the-1967-devaluation-of-the-pound/), where the exchange rate largely remained until the US broke the gold standard on August 15th, 1971 (https://history.state.gov/milestones/1969-1976/nixon-shock). That period between the 1967 and the day the British Pound decimalized on February 15th 1971 (https://www.bullionbypost.co.uk/index/collectible-coins/decimalisation/) is remembered by some as the rare time that one British penny (which was then 1/240th of a pound) happened to be worth one US penny (which as been worth 1/100th of a dollar since 1787: https://coins.nd.edu/ColCoin/ColCoinIntros/Fugio.intro.html).

While the pound initially rose to 2.6 dollars shortly after the "Nixon Shock", the GBP/USD trend from 1971-2021 could be described as a clear but volatile decline.

Our plan to group and look at the other currencies

We charted GBP/USD first because it had by far the longest historic data series, but below are almost 50 other currencies for which we also have USD exchange rate data from BIS for at least the past 60 years. Looking at this list, here is how I would plan to group them:

  1. British Pound, done above
  2. South African Rand, because it is the second longest and has a historic link with the pound
  3. Canadian and Australian dollars, two other major currencies with the pound in their history
  4. Some major currencies that became the Euro, starting with Germany and France, but including Portugal, Italy, and Netherlands
  5. Swiss Franc, and Norway's and Sweden's Krone - Europe's other non-Euro currencies
  6. Japanese Yen and Singapore Dollar
  7. Five other Asian currencies: Philippine Peso, Thai Baht, Chinese Yuan (Renminbi), Korean Won, and Indian Rupee
  8. Latin America: Argentina, Brazil, Colombia, and Mexico

The below count shows the whole list of currencies in the cleaned data set, along with the number of months of historic exchange rates we have on each.

2. The South African Rand Since around 1900

We next look at the South African Rand because it has the second longest data series, and plot it alongside the British pound, against which it seems to have been pegged until the early 1980s.

3. The Australian and Canadian Dollars

Australia and Canada have historic and ongoing links with the UK, but unlike the British Pound, these two currencies tend to more closely reflect the natural resource intensive nature of these two economies, which might be one explanation for why these two currencies have been more stable against the US dollar than the pound has over the past 50 years.

4. Five Currencies That Became The Euro

These are just five of the dozen national currencies that became the Euro in 1999-2001, so have ceased to be individual currencies since, but looking at how these different currencies appreciated or depreciated to the levels at which they were pegged to the Euro provides important insights on the background of these many different economies that have joined the common currency.

The Portuguese Escudo happens to have a longer data history, and one with a far more extreme devaluation chart against the the dollar, so would be better charted separately.

5. Switzerland, Sweden, and Norway

Three European currencies which did not join the Euro have followed two divergent paths:

  1. The Swiss Franc, which has appreciated 5-fold against the dollar since 1971, and
  2. The Swedish krona and Norwegian krone, which have been mostly stable with a slight depreciation path since 1971

The high correlation between Sweden and Norway is notable, as Sweden is in the EU and Norway is not, and the economy of the latter is more related to crude oil than the former.

6. Japanese Yen and Singapore Dollar

In the far east, two currencies stand out as long-term appreciators since 1971: the Japanese yen and Singapore dollar.

7. Asia ex-Japan ex-Singapore

Five other Asian currencies, those of Philippines, Thailand, Korea, China, and India, mostly seem to show similar patterns of long-term depreciation that began in the 1960s, even before the collapse of Bretton-Woods in 1971. China was a relative exception in this group, with its currency strengthening in the 1970s, and even though the Renminbi was unaffected by the Asian Financial Crisis in 1997, it seems to have led the way for relative stability of the Korean Won, Thai Baht, and Philippine Peso since then. Since 1997, the Indian rupee seems to be the only one of these on a relatively consistent long-term "depreciation" trajectory, as evidenced by its relatively high local interest rates, while the other four in this group seem to be trading more in a "side ways range" not unlike the Australian or Canadian dollars.

8. Latin America

Last but not least is this chart of five Latin American currencies, on a log scale showing how extreme the devaluation of these currencies has been to today's value of their current denominations.