Global Forex Market
IN the aftermath of the passing of the tax bill by the US Senate and House of Representatives which confirmed the anticipated US$1.5 trillion fiscal stimulus, this week saw the US dollar fall by 0.7% to 93.278 compared to the euro as investors were doubtful of the tax bill’s impact on the US economy.
Release of a series of economic data also did little to prop the dollar index. These include November Existing Home Sales which exceeded expectations at 5.6% month-on-month, third quarter GDP growth which underwhelmed market consensus at 3.2%, and personal consumption expenditure prices at 1.5% month-on-month in line with expectations.
Brent crude oil edged higher by 2.64% to US$64.90 per barrel as the Forties pipeline remains shut until at least early January. The restricted supply from the North Sea combined with smaller US crude inventories following large drawdowns reported over the week has led Brent to close at its highest in more than two years.
The euro climbed by 1.06% to 1.1874 on the back of the weaker dollar and news of progress by Angela Merkel to form a German coalition government with the Social Democratic Party. Inflation remained at expected levels, recording at 0.1% month-on-month in November, whilst core inflation stood at 0.9% year-onyear in the same month. Besides that, construction output reported lower at 2% year-on-year in October compared to a previous 3.5%.
The British pound appreciated by 0.50% to 1.3386, as Brexit uncertainties fell supported by comments from EU’s chief Brexit coordinator, Michel Barnier, that the Brexit transition period should end by Dec 31, 2020. On a side note, November Public sector net borrowing fell by £0.2bil to £8.1bil compared £8.3bil in November 2016.
The yen continued to climb against the dollar by 0.65% to 113.33 amid Bank of Japan keeping it key interest rate unchanged at -0.1%.
However, yen was slightly affected after governor Haruhiko Kuroda signalled to continue maintaining its ultra-loose policy until a change was deemed necessary. At the same time, November trade balance jumped higher than expected to 113 billion yen from 285 billion yen in October (consensus: -55 billion yen).
All Asia-ex Japan currencies appreciated against the dollar largely due to weaker dollar except for Hong Kong dollar and the baht. The baht shed 0.65% over-the-week amid Bank of Thailand left its benchmark interest unchanged at 1.50% in line with expectations while also raising its growth forecast for 2017 and 2018. Other than that, the South Korean won was seen with the biggest gains despite KOSPI having suffered foreign selling by US$746.2mil over the week.
The ringgit rose marginally relative to the dollar by 0.01% to 4.0790, sustaining the 4.08 level for the second consecutive week as the dollar performed poorly against other major currencies. FBM KLCI on the other hand ended 2.52 points lower at 1749.12 driven by a net outflow of RM146.3mil.
Meanwhile, data for the week revealed unemployment rate to be 3.4% in October as expected and inflation rate at a slower pace of 3.4% year-on-year in November compared to a prior 3.7%, previously.