Two-year Global Foreign Exchange Market
THE dollar climbed against other major currencies, up 0.98% to 93.72 versus the dollar, reinforced mostly by negotiations on the Republicans’ tax plan which has whetted investors’ risk appetite across markets. Simultaneously, US initial jobless claims ending Dec 2 stood at 236,000 as opposed to market consensus of 240,000 whilst non-farm payrolls data showed that new jobs amounted to 206,000 in November. On a side note, Trump’s public declaration of recognition of Jerusalem as the capital of Israel did little to shake the dollar.
Brent crude oil fell by 2.40% over the week to US$62.16 partly due to the reported rise in gasoline stocks of 6.8 million barrels mid-week which offset the effect of the fall in US crude oil stocks. At the same time, although the stronger dollar contributed to weaker oil prices, the confirmed production cuts by dominant players still managed to support it above US$60 per barrel.
The euro dropped by 1.13% to 1.1773 against the dollar. This week’s data showed that GDP growth rate in 3Q2017 stood at 0.6% as expected while retail sales slipped from 0.8% to -1.1% m/m. On the political front, the currency’s performance is subject to the outcome of the SPD convention which will be held in Berlin.
The pound depreciated marginally by 0.02% to 1.3474, recovering losses made over the week following reports that the UK and EU reached a deal on the future role of the European Commission Court of Justice in British legal cases post-Brexit while the UK and Ireland were said to be close to reaching a border deal.
The yen slid against the dollar by 0.82% to 113.09, as the week saw the greenback strengthened. Any positive surprise element was removed as Japan’s GDP growth rate met market expectations at 0.6% q/q while the Leading Economic Index only narrowly missed consensus at 106.1.
All Asia-ex Japan currencies depreciated on the back of the stronger dollar amid the US tax reform progress. The South Korean won weakened by 0.95% despite data reporting a rise in foreign exchange reserves to US$387.25bil in November from October’s US$384.46bil, as well as higher 3Q2017 GDP growth rate at 1.5% q/q. Besides that, the Philippine peso also softened by 0.51%, following lower inflation rate in November at 3.3% y/y and lower Retail Price Index in October at 2.7% y/y.
The ringgit rose against the dollar by 0.09% to 4.0875, reaching the strongest level since September 2016 at 4.0630 on Monday. Over the week, data showed a trade surplus which exceeded market consensus by RM2.0bil, as well as a higher November Nikkei Manufacturing PMI at 52 compared to October’s 48.6. Furthermore, KLCI gained by 0.59% over the past week following a foreign net movement amounting to RM359.7mil.