Global Forex Market

THE US dollar began the week on a softer note but gained momentum following Federal Reserve (Fed) chair Jerome Powell’s optimism on the US economy and his reaffirmation on Federal Open Market Committee’s stance in gradual rate hike; at the same time dismissing concerns of trade war.

While the US dollar index (DXY) witnessed knee-jerk reaction after President Donald Trump’s criticism on the Fed’s monetary policy (an unprecedented move for more than two decades), the greenback gained 0.69% to 95.164. On the data front, June retail sales slowed to down to 0.3% month-on-month (m-o-m) from 1.3% m-o-m in May.

Over the week, Brent fell by 3.72% to US$72.53 per barrel following news that Trump is considering to tap on the country’s emergency oil supplies to push down crude oil prices.

Furthermore, US officials announced that they would consider the request from certain countries for permissions to import Iranian crude oil while the supply outages in Libya eased, thus easing concerns over tighter oil supply, fuelling the drop in the crude oil prices.

On a separate note, the US Energy Information Administration reported a rise of 5.84 million barrels in US crude inventories compared to the previous week.

Amidst a relatively quiet calender week, the euro slipped 0.6% to 1.164 on the back of the stronger dollar.

Meanwhile, on the data front, June inflation rose to 2% year-on-year (y-o-y) from 1.9% y-o-y driven by volatile energy prices. However, core inflation in June posted a 2-month low of 0.9% y-o-y from 1.1% y-o-y in May, raising some doubts on the sustainability of price pressure in the bloc.

The pound tumbled 1.7% to 1.301 due to intensified Brexit noises. Prime Minister May suffered an unexpected defeat on a Brexit amendment in the UK parliament but later managed to squeeze in a narrow victory on another Brexit trade bill.

Meanwhile, economic release was rather mixed which includes May unemployment rate staying flat at 4.2%, wage growth decelerating to 2.7% y-o-y from 2.8% y-o-y in April, and June consumer price index (CPI) and core CPI growing 2.4% and 1.9% y-o-y compared to 2.4% and 2.1% y-o-y, respectively, in May.

The Japanese yen depreciated by 0.16% to 112.9 largely due to the stronger dollar. However, the yen managed to cap loses after positive economic release, which includes June trade balance recording a surplus of 721 billion yen from a deficit of 581 billion in May and core inflation rising to 0.8% y-o-y in June from 0.7% y-o-y in May.

The Asia ex-Japan currencies depreciated against the stronger dollar with the Chinese yuan leading the pack. It shed 1.3% to 6.7751 as the central bank was easing its monetary stance to cushion the trade war impact.

Meanwhile, the Indian rupee slid 0.7%, hitting an all-time low of 69.05 as the hawkish Fed and weakening yuan fuelled the sell-off in rupee. The Indonesian rupiah weakened 0.3% to 14442 amid Bank Indonesia keeping its benchmark interest rate at 5.75%.

The ringgit broke the 4.05 levels, depreciating 0.5% to end at 4.064 largely on the back of the stronger dollar. Besides, the weakening of the Chinese yuan kept sentiment in the ringgit subdued.

Meanwhile, the local bourse posted a gain of 1.9% to 1,759 but recorded a net foreign outflow of RM183mil. On the data front, the June CPI decelerated significantly to 0.8% y-o-y from 1.8% y-o-y in May while the May unemployment rate stayed flat at 3.3%.