Global Forex Market
THE dollar rose 0.97% to 94.61, reaching a three-month high over the week as the US House of Representatives passed the 2018 Budget blueprint, advancing the outlook of Trump’s tax reform while attention remained on the search for the next Fed chair.
The greenback was also supported by the weaker euro and better-than-expected US data as October’s Markit manufacturing Purchasing Managers’ Index (PMI) rose to a 9-month high of 54.5 (consensus: 53.5) while the services PMI edged up to 55.9 (consensus: 55.6).
Meanwhile, new home sales in September hit a 10-year high of 667,000 from 561,000 in August (consensus: 555,000) and durable goods orders added 2.2% monthon-month (m-o-m) in September (consensus: 1%).
Brent crude oil soared by 2.68%, reaching a 27-month high and settling at US$59.30 per barrel amid tightening market expectations after Saudi Arabia’s Crown Prince Mohammed Salman backed the extension of Opec output cuts, supporting signs that Opec countries and allies may agree to extend curbing production to end a global supply gut at a meeting in Vienna on Nov 30.
The euro plummeted to a threemonth low, depreciating by 1.13% over the week to 1.165 after European Central Bank (ECB) president Mario Draghi’s dovish comments emphasised an open-ended programme with no specific end date that could be extended if necessary.
The ECB announced a cut in its bond-buying programme to 30bil per month for nine months beginning January 2018.
However, losses pared as Germany’s IFO Business Climate climbed to an all-time high of 116.7 to 115.3 in September (consensus: 115.2).
The pound fell 0.22% to 1.316 with volatile trading for the week despite stronger-than-expected third quarter GDP growth of 0.4% quarter-on-quarter (consensus: 0.3%) raising expectations for an upcoming Bank of England’s rate hike.
The sterling pared gains against the stronger dollar after October’s CBI Distributive Trades dropped significantly to -36 from 42 in the month prior, marking its sharpest decline since March 2009.
The yen weakened again this week by 0.40% to a five-month high following Prime Minister Abe’s ruling Liberal Democratic party coali- tion’s two-third parliamentary majority at the snap election on Sunday, which led investors to expect a continuation of the Bank of Japan’s current loose monetary policy.
All Asia-ex Japan currencies depreciated against the greenback except the South Korean won, Indian rupee, Taiwanese dollar and Hong Kong dollar.
The South Korean won was the strongest Asian currency, strengthening 0.6% following robust third quarter GDP growth which expanded to 3.6% year-on-year (y-o-y) from 2.7% y-o-y in second quarter 2017, its fastest growth in seven years. This had raised the probability of a rate hike by the Bank of Korea in November. Meanwhile, the Philippine peso was the worst performer this week, weakening by 0.6% mainly due to the stronger dollar.
The ringgit slipped over the week by 0.22% to 4.2345 against the dollar as it could be partly due to the tumbling KLCI before ending at 1,736.80 points where we found foreign participation was in a net selling position for an 11-day streak with a volume of RM356.04mil. Meanwhile, August Coincident Index expanded mildly to 131.3 compared to 131.8 in July and August Leading Economic Index rose 1.9% m-o-m versus 0.2% m-o-m.