Global Forex Market

AS US-China trade tensions began to ease, the US dollar this week was mostly influenced by vital economic data which came in abundance.

Mid-week, the US GDP growth rate for the final quarter of 2017 was finalised at 2.9% y-o-y, revised upwards from 2.5% y-o-y, after which the dollar breached the 90 mark. Besides that, both personal spending and income for February met expectations of 0.2% m-o-m and 0.4% m-o-m, respectively. The US dollar’s last close was 90.151, with an overall gain of 0.8%.

Last week’s rally was cut short on profit-taking action resulting in Brent crude oil prices softening 1.6% to US$70.27/barrel. Oversupply worries also returned when the US Energy Information Association reported that the US domestic oil production (shale oil) increased by 26,000 barrels to 10.4 million barrels per day last week while the American Petroleum Institute showed a surprise build on US crude stockpile of 5.3 million barrels for the week ending 23 March. Losses were capped however, on data by Baker Hughes that revealed a lower number of operating oil rigs in both the US and Canada.

The euro was weaker against its currency pair this week, with minimal economic data to provide support. Indicators of the economic climate like business confidence, industrial, services, as well as economic sentiment in March were all lower than in the previous month contradicting Mario Draghi’s (governor of the European Central Bank) recent comments that painted a rosier outlook on the economy

The pound sterling depreciated against the dollar by 0.8% to 1.4018. The currency gained little support from economic data this week, with the final estimate for GDP growth rate in 4Q17 equating the preliminary reading of 1.4% y-o-y, a fall from the previous quarter’s rate of 1.8%.

Meanwhile, the Nationwide House Price Index, which grew at 2.1% y-o-y in March, was down from 2.2% y-o-y in the month prior, signalling a stable property market.

Amid easing trade tensions, the yen reversed its gains from last week, falling 1.6% to 106.43. The yen lost ground largely due to the stronger dollar. On the other hand, we noticed a mixed bag of data as February retail sales rose to 1.6% y-o-y from 1.5% y-o-y while unemployment rate picked up to 2.5% from 2.4% previously.

Foreign outflows widened by 2.1 trillion yen over the week, marking the fifth consecutive week of foreign outflows.

All Asia ex-Japan currencies gained traction over the week despite the stronger dollar index except the baht, Indian rupee and Hong Kong dollar. For the week, the Korean won gained 2.0% to 1065.93 following the cooling trade and geopolitical tensions. However, South Korea’s 4Q17 slowed down to 2.8% y-o-y compared to 3.0% y-o-y previously.

Meanwhile, the baht depreciated 0.2% to 31.26 amid the Bank of Thailand (BoT) leaving its policy rate unchanged at 1.5%. Though the BoT raised its growth forecast in the meeting, it trimmed its inflation projection, fuelling expectations that the BoT will keep the policy rate unchanged throughout 2018.

The ringgit surged 1.3% to 3.8692 against the greenback. This week, Bank Negara’s 2017 annual report cited that the economy is projected to grow between 5.5% and 6.0% on the back of healthy domestic demand and a resilient external environment. Also, Bank Negara expects inflation to moderate between 2% and 3% largely due to stronger ringgit and stable commodity and energy prices.

The FBM KLCI on the other hand, shed 0.5% while seeing a net foreign outflow of RM59mil. On the economic data front, February Producer Price Index came in at -3.4% y-o-y, lower than the previous -1.2% y-o-y.