Global Forex Market

ANOTHER week, another dip for the US dollar, falling by 0.28% to 95.74 on Thursday, mainly weighed down by political turmoil surrounding Trump following the release of e-mail chain by Donald Trump Jr where a Russian lawyer offered detrimental information on Hillary Clinton.

Additionally, the dollar was also dragged by dovish comments by Fed’s Brainard who urged policymakers to move cautiously on further rate hikes in order to lift inflation to its 2% target.

During the week, Fed chair Janet Yellen gave her testimony where she also stressed on a gradual approach to tightening due to the recent slowdown in inflation.

Meanwhile, produce price index in June rose more-than-expected to 0.1% month-on-month (m-o-m) for the second consecutive month while initial jobless claims for the week ended July 8 dropped to 247,000 from 250,000 previously.

Brent crude oil rebounded this week with a rise of 3.6% to US$48.4 per barrel after favourable Energy Information Administration (EIA) and American Petroleum Institute (API) reports for the week ending July 7.

The EIA reported that US domestic crude supplies dropped to 7.56 million barrels while API reported a huge decline in US crude oil inventories of 8.133 million barrels.

The euro was the second-worst-performing G10 currency, having declined 0.03% primarily dragged by comments by European Central Bank’s Rimsevics where he said that the central bank’s asset purchasing programme could continue for at least a couple of years amid low inflation.

In May, industrial production rose to 1.3% m-o-m from 0.3% m-o-m in April.

The pound rose against the US dollar by 0.4%, led by improvement in unemployment data, which dropped to its lowest since June 1975 to 4.5% in May from 4.6% in April.

Further supporting the pound was Bank of England’s McCafferty’s hawkish statement on Thursday which urged the central bank to unwind its £435bil quantitative easing programme early.

The yen strengthened by 0.6% due to the drop in 10-year US Treasury yields following Yellen’s dovish congressional testimony. During the week, Bank of Japan’s (BoJ’s) Kuroda reiterated the central bank’s continuation of its stimulus programme until inflation reaches BoJ’s target of 2%.

All Asia ex-Japan currencies appreciated against the US dollar. In China, inflation was steady at 1.5% year-onyear (y-o-y) for the second consecutive month in June, maintaining its fastest inflation since January 2017 as food prices declined while non-food prices eased.

In India, headline inflation continued to moderate for the third consecutive month to a record low of 1.54% y-o-y from 2.18% y-o-y, dragged by the biggest decline in food prices on record.

The ringgit appreciated by 0.12% against the greenback but was the second-worst-performing Asian currency this week.

The ringgit was supported by the lift in crude oil prices, lower 5-year credit default swap (CDS), Bank Negara’s more upbeat tone on the domestic economy and May’s industrial production which expanded by 4.6% y-o-y from 4.1% y-o-y in April.

At the latest monetary policy meeting, Bank Negara left the overnight policy rate unchanged at 3% with no change to the statutory reserve requirement, which is at 3.5%.

Furthermore in its statement, Bank Negara reflected a more upbeat mood on growth while envisaging inflation to be contained.