Major Trade Partner Currency Trend for September 2020
As we get closer to the United States of America President Election, investors and traders can see one thing in the future- uncertainty.
Therefore, we can see market participants start preparing for the unknown.
As debates and the election come up, statements will be said, and policies will be announced to sway the markets significantly.
The demand for the dollar may be pointed to investors and traders building up a cash position in their portfolios either to take advantage of significant market swings or to hedge against market slumps.
USD
September started off with the US dollar hitting a more than two-year low and a fourth straight month of losses in the wake of US Federal Reserve’s policy shift on inflation.
The US economic calendar was full of important releases on manufacturing, durable goods, and employment. However, positive results are unlikely to put an end to the dollar’s decline as traders were concerned that the interest rate in US will stay lower for longer compared to other countries.
The number of Americans applying for initial unemployment benefits came in at a larger than forecast 884,000.
But the figure still remained extremely high, one of several signs that their labor market recovery has been losing steam as the COVID-19 pandemic continues and government support lapses. Meanwhile, the Chinese Yuan also hung on to big gains when betterthan-expected economic data reinforced investors’ perception that the world’s second largest economy is leading the global recovery from the COVID-19 pandemic.
The Chinese data showed that industrial output accelerated the most in eight months in August, while retail sales grew for the first time this year.
The Federal Open Market Committee left its benchmark rate unchanged in the range of 0 per cent to 0.25 per cent and tied its policy guidance to inflation rising above two per cent for some time.
The US Retail Sales recorded at 0.6 per cent lower than August’s data by 0.3 per cent indicating that consumer spending has declined. A resurgent US dollar later held on to gains after virus fears and worries about US stimulus drove a wave of selling in just about everything else.
The dollar again rose 0.6 per cent against the euro, 0.9 per cent against the Aussie and even made gains against the safe-haven currencies of the Japanese yen and Swiss franc.
The dollar continued gaining altitude across the board, supported by positive US economic data showing that existing home sales surged to six million in August, the highest level in nearly 14 years.
September ended with the dollar dipping from a two-month peak as renewed hopes of US stimulus eased investors’ concerns about economic recovery, while the Chinese Yuan gained after the country was added to a global bond benchmark.
Democrats in the US House of Representatives are working on a $2.2 trillion coronavirus stimulus package that could be voted on early October.
The move came after the latest data showed the number of Americans filing new claims for unemployment benefits unexpectedly increased last week in a sign the economic recovery was running out of steam.
Latest data published the August Goods Trade Balance, which showed that the deficit was of $-82.94 billion, worse than the previous $-80.11 billion.
A positive surprise came from the Conference Board Consumer Confidence report, which jumped to 101.8 in September, its highest level since the pandemic started.
AUD
Although the policymakers were not expected to make any major changes, traders would be eager to understand the Australian economic outlook as they continue to battle the effects of the pandemic. Australia’s economy is officially in a recession after June quarter data revealed the nation’s GDP has dropped by seven per cent.
This is the biggest drop since records began in 1959.
A technical recession is defined by two consecutive quarters of negative growth. In March quarter, their economy had contracted by 0.3 per cent.
More than a million people have lost their jobs since March when Australia shut down entire sectors of the economy, hitting private sector demand and investments.
The Reserve Bank of Australia is expecting the downturn sparked by the pandemic will cause unemployment to peak at 10 per cent. The Australian dollar on the other hand, came under a bit of pressure after their trade surplus narrowed more than expected in July.
Their export fell by four per cent while imports increased by seven per cent causing their trade balance to decline to AU$4.6bn (FJ$ 6.48bn). A bit of breather from Australian counterparts during the month as their retail sales jumped to 3.2 per cent in July.
Retailers there enjoyed another strong period of sales with gains in all states and territories except Victoria.
But - this was not enough to draw attention for the Aussie dollar. Chinese CPI came out at a healthy 2.4 per cent in August - meeting expectations. Any signs of improvement in Chinese economy is positive for the Aussie dollar, as China is one of the largest export destinations for the Australians. Meanwhile, demand for the Aussie Dollar picked up sharply on the back of an unexpectedly improved Westpac consumer confidence index.
As forecasts had pointed towards a slight dip in sentiment on the month Australian exchange rates were encouraged as the index instead picked up from 79.5 to 93.8. This suggests that Australian consumers are taking a more optimistic view in September, improving the chances of economic activity strengthening further in the third quarter.
The Reserve Bank of Australia’s September meeting minutes were and it showed that the Central Bank will maintain its “highly accommodative settings” as long as required and will continue to consider how further policy measures could support the country’s flagging economy.
Australia’s jobless rate unexpectedly declined from a 22-year high in August to 6.8 per cent as employment surged past all expectations, though the increase was largely led by part-time work.
Employment skyrocketed by 111,000 against predicting a fall of 50,000.
The Reserve Bank of Australia’s deputy governor said a weaker Aussie dollar would be beneficial for the Australia economy.
She also mentioned lower cash rates and negative rates as other options and added that the economy is currently seeing a gradual and uneven recovery.
Their consumer spending fell by 4.2 per cent month-on-month in August, following July’s 3.2 per cent increase.
This validated the Reserve Bank of Australia’s cautiously optimistic view of the economic recovery, and its commitment to keep monetary policy loose for a prolonged period. Also, Australia would simplify bank lending rules to free up credit in a bid to stimulate the economy, which slid into its first recession in nearly 30 years due to the COVID-19 pandemic.
The pandemic has taken a heavy toll on Australia’s economy. To cushion the blow, the conservative Australian government has relaxed several rules for businesses and rolled out stimulus packages worth about AU$314 billion (FJ$479bn).
NZD
And in New Zealand, their higher export prices for dairy, kiwifruit, and logs in the June 2020 quarter helped push overall export prices to their highest level.
On the other hand, their Import prices fell slightly, boosting their merchandise terms of trade to a new high of 2.5 per cent.
The New Zealand dollar is set to extend lead against its major counterparts after their central bank Governor Adrian Orr played it cool on currency.
The RBNZ appears hell-bent on doing more in the coming months to support their economic recovery. New Zealand central bank is predicting that their jobless rate will rise to 8.1 per cent by the end of the year and inflation will ease to just 0.4 per cent by the first quarter of 2021.
The country is set to record its sharpest quarterly contraction and officially enter recession when it releases second quarter economic data, reflecting the full impact of coronavirus lockdowns on business. Their GDP is expect to fall 13.3 per cent year-on-year putting New Zealand in its first technical recession since 2010.
New Zealand recorded a contraction in Gross domestic product. A seasonally adjusted 12.2 per cent quarter-on-quarter, its sharpest quarterly contraction on record and largely in line with forecasts of a 12.8 per cent.
The RBNZ interest rate has been fixed at 0.25 per cent since March 2020.
At its September monetary policy meeting, the Reserve Bank of New Zealand decided to keep the official cash rate unadjusted at a record low of 0.25 per cent for the fourth month in a row, as widely expected. Meanwhile, their trade deficit narrowed to NZ$353m (FJ$538m) in August from a NZ$1642m (FJ$2,315m) deficit in the same month of the previous year.
Merchandise goods exports rose 8.6 whereas goods imports fell 16 per cent.
The annual trade balance for the year ending August 2020 was a surplus of NZ$1340bn (FJ$1,889.34bn) and was the largest annual trade surplus since 2014.
Some investors are watching the Australian and New Zealand dollars, which have come under pressure on growing expectations their central banks could deliver more monetary stimulus.
JPY
Japan’s economy shrank an annualised 28.1 per cent in April-June, more than a preliminary reading of a 27.8 per cent contraction, suffering its worst post-war contraction. Bank of Japan kept monetary policy steady and stressed its readiness to work closely with the new Government, who has vowed to ease the economic blow from the coronavirus. The safe-haven yen rose to a seven-week high against the dollar amidst a batch of generally weak US data and reservations about the US economic outlook for the pace of recovery.
GBP
The pounds has erased some of its early losses, with hopes of a Brexit
deal improving after the UK sent a host of new trade deal drafts in a bit to break the deadlock.
With the final scheduled round of talks commencing September end, the hope is that both sides will find enough compromise to enable a final ‘tunnel’ phase to take us into the EU summit in mid-October. While Johnson managed to bring about a last-minute deal for the transitional period, there are doubts over whether a similar approach could work when there is a need for a comprehensive trade deal.
Nevertheless, with the UK seemingly extending an olive branch at such a critical time, the pound could be in for plenty of volatility as we learn just how far away a deal is.
The British pound has been rising with stronger-than-expected job figures and opposition to a plan to breach the Brexit treaty. Meanwhile, the pound fell sharply after the Bank of England said it had briefed monetary policymakers on how a negative interest rate could be brought in.
As expected, Bank of England kept its interest rate at 0.10 per cent.
EUR
In the Euro zone- the EU published the September Economic Sentiment Indicator, which improved to 91.1 from 87.5 in previous month. Germany released the preliminary estimate of September inflation, which was worse than anticipated, printing at -0.2 per cent year on year.
The Old Continent is in the middle of a second wave, with new restrictions announced in France, Spain and the UK.
The pandemic continues to take its toll on economic progress, with softening macroeconomic figures indicating that any possible recovery would take much longer than initially estimated.
While markets expected the ECB to keep policy steady, investors closely watched President Christine Lagarde’s comments on how the euro’s rise to a two-year high affects the outlook for inflation and economic growth.
To conclude, several factors combined to put the greenback back in its throne as we come towards the end of September.
Speculative interest runs to safety these days as the coronavirus pandemic keeps taking its tolls in global economic growth.
Data across the globe was tepid, while the number of new daily cases is on the rise, particularly in Europe, but also hitting hard the south hemisphere.
As we move into the final quarter of the year it can be a time for reflection and a time to slow down, not so in 2020.
After a year of pandemics, unpredictable stock market moves and some troubling geopolitical developments, there is still the US Presidential election, the EU/ UK Brexit trade deal negotiations and the ongoing economic recovery from the COVID-19 pandemic all to come.
Feedback:
Tax laws authorises the Fiji Revenue and Customs Service (FRCS) to impose administrative penalties for a range of conduct such as failing to lodge tax returns on time, failing to pay taxes by due date, claiming a deduction that the taxpayer is not entitled to and making a false or misleading statement.
The purpose of the penalty provisions is to encourage taxpayers to take reasonable care to comply with their obligations.
In this week’s Tax Talk, we will look at the process for taxpayers to request for Remission of Penalties through the Taxpayer Online Services (TPOS) and how it will be processed by FRCS.
Request for Remission of Penalties
The taxpayer can request for remission of the penalty payable by them under section 48(6) of Tax Administration Act 2009 (TAA). This section states that “A person liable to pay a penalty may apply in writing to the chief executive officer (CEO) for the remission of the penalty payable and such application must include the reasons for the remission.”
Section 48(7) of the Tax Administration Act 2009 provides that the CEO may, upon receipt of an application from the taxpayer or on the CEO’s own motion remit, in whole or in part, any penalty payable by a person.
The purpose of penalties is to impose a financial cost on a taxpayer as a consequence of a particular behaviour by the taxpayer, so that the taxpayer(s) will be deterred from engaging in the similar type of behaviour in the future.
Some of the different types of penalties that are available for the taxpayer to request for remission include late lodgement penalty, late payment penalty, penalty for failure to maintain proper records, penalty for breach of possession agreements and advance tax shortfall penalty.
The law specifies the conditions under which FRCS can apply a penalty and the amount of the penalty.
Current Process
Taxpayers liable to pay penalty can apply in writing to FRCS CEO for remission of penalties payable explaining the reason why penalty should be remitted.
On receiving the application, the CEO may with own discretion remit whole or part of the penalty payable by taxpayer.
The current procedure for remission of penalties will still continue for all tax types that are not available online except for Value Added Tax (VAT), Service Turnover Tax (STT), Environment and Climate Adaptation Levy (ECAL)- Prescribed Services, ECAL -Plastic Bag, Fringe Benefit Tax (FBT) and Telecommunications levy
Applying for Remission of Penalty on TPOS
1.Log on to the FRCS Taxpayer Online Services http://mytpos.frcs. org.fj using username and password.
2.kavigate to the “Requests” tile and click “Waivers” then choose the option for ‘Remission of Penalties. Following this, the applicant will be navigated to the first page of the application where he/she must tick the instruction checkbox in order to proceed to the next step of the application.
3.The taxpayer will then be redirected to the page requesting “reference number”. If the taxpayer has the reference number of the tax type for which remission of penalty is applied for, they can enter it. The taxpayer can add multiple reference numbers for requesting the remission of penalty. However, in cases where reference number is not available, the taxpayer then can select “ko” as an answer.
A dropdown menu showing different tax types with corresponding penalties will appear allowing the taxpayer to select the tax type he/she wants to file remission of penalty for.
4.After selecting the tax type, select the period for which the remission for penalty is filed for and then provide the remission amount with reasons for applying the remission of penalty. Remission amount can be applied in full or partial as per taxpayer’s need.
The taxpayer can also choose to explain the reason in detail. 5.Upload mandatory evidence supporting the reasons for remission for penalty.
Following this, click ‘Continue to kext Step’ to proceed.
6.‘Declaration’ Screen will then appear.
7. To complete the application, the applicant must fill the required details on the ‘Declaration’ screen. On this screen:
■If the taxpayer is an individual, the Taxpayer Identification Number (TIk) will be prepopulated.
the taxpayer is a non-individual, then the TIk must be entered, and their designation must be selected from a drop-down. ■The applicant must tick the checkbox to declare that the information provided is correct.
■O■ce the declaration checkbox is ticked, ‘Submit’ button will be enabled and displayed.
Once the application is submitted a confirmation will be emailed. However, the taxpayer will receive a warning message advising on any outstanding issues before submission.
While the taxpayer will be able to submit the application, it is advisable that he/she resolves the outstanding matters as the application maybe rejected if outstanding issues continues.
It is important to note that the Statement of Tax Accounts (STA) in TPOS will only show remission for tax types currently live on the Taxpayer Online Services.
These include Value Added Tax (VAT), Service Turnover Tax (STT), Environment and Climate Adaptation Levy (ECAL)- Prescribed Services, ECAL -Plastic Bag, Fringe Benefit Tax (FBT) and Telecommunications levy. However, there are other Statement of Tax Accounts that are currently not on online like Income Tax.
One of benefits of using the Taxpayer Online Services is that the processing time for applications are faster.
However, taxpayers who have not registered on the online portal or have not updated their information on the system may face difficulties in accessing the online services. FRCS encourages taxpayers to register for the Taxpayer Online Services and use it.
Also check that your information on the online portal is updated. Amongst other benefits, the online services will help improve ease of doing business.
The new system has simplified the processes and enhanced services for our customers.
Contact details vou can access TPOS on http:// mytpos.frcs.org.fj. For more information and feedback please email us on