We’ve touched on the impact that currency risks can have on frontier market investments before, but countries with fixed exchange rates present a unique dilemma. On the one hand currencies are by definition stable, alleviating currency worries since FX volatility is near zero. On the other hand, they are susceptible to large one-off moves and de-peg risk. Investors in Venezuela experienced this firsthand last week when the country devalued its currency by 32%, from 4.3 VEB to 6.3 VEB per USD.
We scoured the web for a good list of countries that still use fixed currency rates and were left wanting. Existing ones out there contain outdated information, or are filled with currencies of small countries that are irrelevant even to frontier investors. This is why we have compiled a list of all countries that still maintain fixed currency exchange rates and have populations over 1 million (with some exceptions). By our count there are 36 relevant countries in all, listed below for future reference.
Interestingly the majority of these countries are pegged to the EUR (17 total), with the USD coming second (13 total). This will make things extra interesting if the Euro is ever broken up since many of these are themselves in a monetary union (pegged to another monetary union).
Africa is home to most of the fixed currency countries at 19, with 14 of them using the CFA franc that is pegged to the Euro and three pegged to the South African Rand (ZAR) as part of a Common Monetary Area. The Middle East is another bastion for fixed currency rates, with 7 countries all pegged to the USD. Nepal is the only country pegged to the Indian rupee, which given the volatile status of INR has increased talk of breaking away from this peg.
The full list of countries with fixed currency exchange rates, population greater than 1 million: (last updated Feb 2015)
|Country||Region||Ccy Name||Code||Peg Rate||Peg Ccy||Rate Since|
|Benin||Africa||West African CFA Franc||XOF||655.957||EUR||1999|
|Bosnia and Herzegovina||Europe||Convertible Mark||BAM||1.95583||EUR||2002|
|Burkina Faso||Africa||West African CFA Franc||XOF||655.957||EUR||1999|
|Cameroon||Africa||Central African CFA Franc||XAF||655.957||EUR||1999|
|Central African Republic||Africa||Central African CFA Franc||XAF||655.957||EUR||1999|
|Chad||Africa||Central African CFA Franc||XAF||655.957||EUR||1999|
|Cuba||Central America||Convertible Peso||CUC||1||USD||2011|
|Equatorial Guinea||Africa||Central African CFA Franc||XAF||655.957||EUR||1999|
|Gabon||Africa||Central African CFA Franc||XAF||655.957||EUR||1999|
|Guinea-Bissau||Africa||West African CFA Franc||XOF||655.957||EUR||1999|
|Ivory Coast||Africa||West African CFA Franc||XOF||655.957||EUR||1999|
|Mali||Africa||West African CFA Franc||XOF||655.957||EUR||1999|
|Niger||Africa||West African CFA Franc||XOF||655.957||EUR||1999|
|Republic of the Congo||Africa||Central African CFA Franc||XAF||655.957||EUR||1999|
|Saudi Arabia||Middle East||Riyal||SAR||3.75||USD||2003|
|Senegal||Africa||West African CFA Franc||XOF||655.957||EUR||1999|
|Togo||Africa||West African CFA Franc||XOF||655.957||EUR||1999|
|United Arab Emirates||Middle East||Dirham||AED||3.6725||USD||1997|
Updated Feb 2015:
– reordered in alphabetical order
– removed Latvia and Lithuania, which joined the Euro in 2014