Global Forex Market

THE dollar appreciated by 0.63% to 96.7 as investors flocked to safe-haven assets due to the rout in the equity market. The Dow Jones lost 1.31% to 24,984.55 while the S&P 500 tumbled 1.83% to 2,705.57.

The sell-off was largely due to growing concerns on the US-China trade tensions and faster rate hikes which have translated to slower corporate earnings.

The Fed continued to reassure the US economy and hinted that the December rate hike is “very likely” despite the attack by President Donald Trump.

Meanwhile, September new home sales were rather disappointing, shrinking 5.5% month-onmonth (m-o-m) (previous: -3.0% m-o-m; cons: -1.4% m-o-m); but better than September’s durable goods orders which came in at 0.8% m-o-m (previous: 4.6% m-o-m; cons: -1% m-o-m).

Brent oil plunged by 3.63% to close at US$76.5 per barrel. Crude oil inventories continued to add downward pressure on its price along with revised market growth to a lower bound of the range.

The fiasco surrounding a dead journalist and the Saudi crown prince weighed in, Iran and Venezuela’s production woes and diminishing spare capacity were being downplayed by weakening top demand currencies (the Indian rupee and Chinese yuan) and expectation of a slowing global demand.

The International Energy Agency downgraded the global oil demand to 1.4 million barrels for 2019 following the revised outlook from the Organisation for Economic Co-operation and Development and the International Monetary Fund.

The euro dived 0.78% to close at 1.138 against the dollar due to:

(1) the European Commission rejecting the Italian budget and requested a new submission within three weeks;

(2) disappointing data release fuelling concerns on the bloc’s growth momentum i.e. the October Markit Manufacturing, Services and Composite PMI Flash all came in lower than expectation at 52.1 points, 53.3 points and 52.7 points, respectively (manufacturing: previous - 53.2, cons - 53.9 points; services: previous - 54.7 points, cons - 54.5 points; composite: previous - 54.1 points, cons - 53.9 points); and

(3) the European Central Bank keeping both its interest rates and forward guidance unchanged while acknowledging growing political risk in the bloc.

The pound continued to weaken over the week, diving 1.13% to 1.282. At the beginning of the week, the pound gained steam after some progressions on the Irish border issue but the gain was erased after the UK prime minister faced a leadership challenge.

This week’s data release includes: (1) Fourth quarter CBI Business Optimism Index which came in at -16 points from previous -3 points and

(2) October CBI Industrial Trends Orders recording -6 points from September’s -1 point (cons: -1 point) which provided little support to the currency.

The Japanese yen gained 0.35% to close at 112.42 against the greenback as demand for the safe haven currency recovered. The yen’s strength was also supported by positive data release:

(1) August All Industry Activity Index which recorded 0.5% m-o-m (previous: -0.2% m-o-m; cons: 0.4% m-o-m);

(2) October Nikkei Manufacturing PMI Flash came in at 53.1 points (previous: 52.5 points; cons: 53.1 points);

(3) August Coincident and Leading Indices at 116.7 points (previous: 116.1 points; cons: 117.5 points) and 104.5 points (previous: 103.9 points; cons: 104.4 points), respectively.

The majority of Asian ex-Japan currencies depreciated against the dollar. The Indian rupee emerged as the best performing currency, up 0.39% to 73.275. On the other hand, the South Korean won was the worst-performing currency, plunging 0.83% to 1138.11 after third quarter GDP came in worse than expectation at 2% year-on-year (y-o-y) (previous: 2.8% y-o-y; cons: 2.2% y-o-y).

Meanwhile, the Chinese yuan also lost a marginal 0.02% to close at 6.9489 amid the Chinese government planning to reduce taxes in a move to boost consumption spending that can help support the weakening growth.

The ringgit slid 0.24% to 4.170 against the greenback over the week as risk aversion persisted. The local bourse rebounded slightly by 0.3% to 1,686.59 while recording a net foreign outflow of RM256.95mil.

This week’s data release includes the August Leading and Coincident Indices which came in at 0.3% m-o-m and -0.3% m-o-m, respectively (previous - leading index: 0.1% m-om; coincident index: 1.3% m-o-m).