Global Forex Market
AFTER a short-lived rebound, the dollar tumbled by 1.8% this week to a nine-month low of 95.63 on Thursday weighed down by the rally in euro and pound, dovish comments from Fed Chair Yellen as well as weak jobs and housing data despite an upwards revision of first quarter Gross Domestic Product .
Fed’s Yellen stated that a very gradual hike in interest rates would be preferred. On the data front, initial jobless claims for the week ended June 24 rose more than expected to 244,000 from 242,000 previously.
Meanwhile, economic growth in the first quarter was confirmed at 1.4% quarter-on-quarter, higher than the previous estimate of 1.2% q-oq due to improvement in consumer spending and exports.
Crude oil prices seem to have bottomed out this week with Brent crude oil rising by 3.5% to US$47.22/barrel after EIA reported US crude oil production fell by 100,000 barrels per day to 9.25 million barrels per day for the week ended June 23.
The euro advanced 2.3% against the dollar to a 14-month high fuelled by expectations of a stimulus reduction soon following ECB’s Draghi’s hawkish statement that the central bank could adjust its interest rates and bond purchases as the eurozone’s economy improves.
Further lifting the euro was Germany’s inflation in June which accelerated more than expected to 1.6% year-on-year from 1.4% (y-o-y) in May.
The pound rose to a one-month high this week against the dollar by 2.2% after a shift in BoE’s Carney tone on Wednesday where he stated that the central bank may need to start removing its stimulus if wages start to move up and depending on the impact of Brexit negotiations and tighter financial conditions on the domestic economy.
The yen depreciated by 0.3% despite the weaker dollar due to gains seen in major US equity indices and Asia early in the week which lessened the yen’s safe haven appeal.
The currency pair was also weighed down by disappointing retail sales data which eased to 2.0%y/y in May from 3.2%y/y in April. However, a sharp retreat in US stocks later towards the end of the week had managed to lift the yen.
All Asia ex-Japan currencies depre- ciated against the US dollar except the yuan, Singapore dollar and baht.
In China, NBS manufacturing PMI in June rose to 51.7 after maintaining a reading of 51.2 since April 2017. Increase in manufacturing activity was driven by more production, new orders and new export orders.
In Korea, consumer confidence surged to 111.1 in June from 108 in May, its highest reading since December 2010 as consumers were optimistic about current domestic economic conditions, future household spending and current living standards.
The ringgit weakened by 0.13% against the greenback over the week continually pulled down by tepid Brent crude oil prices and higher 5-year CDS.
In May, producer prices accelerated to 8.0%y/y from 7.5%y/y in April mainly due to elevated costs in agriculture, forestry and fishing, manufacturing and water supply.
Meanwhile, M3 money supply, also known as broad money, rose by 4.7%y/y in May 2017 compared to 4.4%y/y in April, its fastest growth since June 2015, reflecting a pickup in economic activity.