Euro appreciation against the dollar penalizes franc zone cotton exporters twice

Evidence

The international price of primary products is often fixed in dollars, which remains the main currency used in international trade. This is the case with cotton. But its price in dollars varies as much as the euro–dollar exchange rate. Consequently, the cotton producers of the franc zone can lose out twice: when the price of cotton in dollars falls and when the euro appreciates against the dollar. To understand why an appreciation of the euro implies a decrease in the value of the dollar in CFA francs, let’s take an example. Suppose that 1 euro is exchanged for 1 dollar: based on this parity, 10 dollars will give 6,559.57 CFA francs (since 1 dollar = 1 euro = 655.957 CFA francs). Suppose now that the euro appreciates and that 1 euro is now exchanged for 2 dollars: this is equivalent to 1 dollar = 327.98 CFA francs; therefore, the equivalent of 10 dollars in CFA is now 3,279.8 CFA francs, a reduction that reflects the evolution of the euro–dollar exchange rate. — Fanny Pigeaud_ Ndongo Samba Sylla, Africa’s Last Colonial Currency, 642

Categorization

• XREF: Explains the structural double-loss mechanism linking the peg to euro appreciation, echoing the 1994 devaluation debate. — connects to: The euro–dollar rate doubles the currency risk borne by franc-zone cotton producers.; The same strong euro that hurts France devastates African export competitiveness; Euro appreciation deteriorates franc zone trade balances — Fanny Pigeaud_ Ndongo Samba Sylla, Africa’s Last Colonial Currency, 299 (+3 more)

Related

• The euro–dollar rate doubles the currency risk borne by franc-zone cotton producers. (similarity 0.93)
• The same strong euro that hurts France devastates African export competitiveness (similarity 0.92)
• Euro appreciation deteriorates franc zone trade balances (similarity 0.91)
• A ten-cent euro appreciation pushed Burkinabè cotton farmers from profit into losses (similarity 0.88)
• An overvalued CFA franc penalised African exports while favouring imports from France (similarity 0.86)
• A strong euro penalizes French exports far more than German ones (similarity 0.85)
• The CFA franc was deliberately overvalued against the metropolitan franc. (similarity 0.82)
• CFA ‘stability’ masks currency fluctuation against dollar and pound (similarity 0.82)
• France’s own anti-inflation policies against the mark caused the CFA overvaluation that forced crisis. (similarity 0.82)
• Euro pegging diverts trade toward France and blocks local industrialization. (similarity 0.82)
• Devaluation and revaluation simply shift the fixed CFA-euro parity (similarity 0.82)
• France’s strong-franc policy transmitted its appreciation shock to the CFA zone (similarity 0.82)
• The 1994 devaluation capped decades of Paris refusing to adjust the overvalued CFA franc (similarity 0.81)
• An overvalued CFA franc was engineered to reorient colonial trade toward France (similarity 0.81)
• France’s strong-franc policy worsened CFA countries’ competitiveness (similarity 0.81)

Broader Connections

• An overvalued CFA franc penalised African exports while favouring imports from France #corroborates (0.80) — Fanny Pigeaud_ Ndongo Samba Sylla, Africa’s Last Colonial Currency, 128