Global forex market
THE dollar witnessed a see-saw session during the week, closing lower by 0.20% at 97.43. Despite starting the week on a softer footing following the global risk-on sentiment, it pared losses towards the end of the week, benefiting from safe-haven buying.
The demand for safe-haven assets came after a rapid rise in coronavirus infections in some US states, and news that the Trump administration is reviewing tariffs on European Union (EU) products.
The administration said it was considering tariffs on Us$3.1bil of exports from the United Kingdom, France, Germany and Spain.
Nevertheless, investors this week welcomed the latest Federal Reserve (Fed) efforts to ease Volcker Rule restrictions – a rule in which could free up billions of dollar in capital in the banking industry and will allow banks to make investments in areas such as hedge funds.
Brent crude fell 2.70% to US$41.1 per barrel after the Energy Information Administration or EIA reported crude oil inventory rising 1.4 million barrels per day (bpd) as at June 19 from 1.2 million bpd in the week prior (cons: 0.3 million bpd) – as well as the resurgence of pandemic fears.
The euro appreciated by 0.36% to 1.12 due to better-than-expected economic data release at the start of the week, ie, the June prelim Markit Manufacturing purchasing managers’ index (PMI) rose to 46.9 from 39.4 in May (cons: 44.5); and the June prelim Markit Services PMI climbed faster to 47.3 from 30.5 in May (cons: 41.0).
Meanwhile, the European Central Bank this week fought back against a German court challenge, justifying its under-fire bond purchasing scheme and releasing confidential documents to fend off the threat.
The pound strengthened by 0.56% to 1.24, benefiting from the weaker dollar at the start of the week, as well as better-than-expected June prelim Markit/chartered Institute of Purchasing and Supply or CIPS Composite PMI, which jumped to 47.6 from 30.0 in May (cons: 41.0).
However, the gains were capped due to growing concerns whether the UK can get a deal on its future relationship with the EU.
The yen weakened by 0.30% to 107.2 against the dollar. Meanwhile, the latest review of the Bank of Japan’s Summary of Opinions highlighted that the Japanese economy is showing some signs of bottoming out, albeit a warning that the economy still faces the risk of stagnation should there be a prolonged pandemic impact.
The majority of Asian ex-japan currencies appreciated against the dollar.
The rupee topped the list of best performers for the week, up 0.69% to 75.67, supported by weaker crude oil prices added with net foreign buying in its equity market amounting Us$362mil this week.
Meanwhile, the peso appreciated by 0.11% to 50.02 after Bangko
Sentral ng Pilipinas (BSP) unexpectedly decided to cut the key policy rate by 50 basis points (bps) to 2.25%, the lowest policy rate in the Philippines’ history.
The ringgit however, weakened by 0.25% to 4.28, partly due to foreign selling.
Economic data release this week includes May inflation at -2.9% yearon-year, unchanged from April; and April leading index growing 0.3% month-on-month (m-o-m) from -4.9% m-o-m in March.