Global Forex Market
UNCERTAINTIES surrounding President Donald Trump’s tax reform took a toll on the US dollar this week, causing it to fall by 0.45% to a near two-week low of 94.51.
It was reported on Thursday that the US senate planned to delay the cut in corporate taxes until 2019 in order to ease the burden of federal debt. This had managed to offset rises seen during the week when September’s Jolts job opening exceeded expectations with a rise to 6.093 million while IBD/TIPP economic optimism in November improved to 53.6, beating consensus of 51.2.
Brent crude oil remained above US$60 per barrel for the past week, reaching an intra-day high of US$64.65/barrel on Tuesday before settling 0.7% higher at US$63.93.
Saudi King Salman’s consolidation of power has contributed to increased prices as the crackdown on corruption sends out a positive signal. Saudi’s waning relationship with Iran and Qatar, however, may affect supply if it decides to keep larger stocks at home in the face of uncertainties.
The euro fell slightly within the week before climbing up to 1.164, 0.34% higher than last week. It was supported by the upward revision of European Commission’s GDP forecast to 2.2% from 1.7% previously, indicating optimism about the euro area reaching its inflation target of just under 2%.
The pound rose by 0.68% to 1.315 in response to news that Brexit negotiations will be accelerated thus diminishing uncertainty over a new UK-EU trade deal. This has outweighed recent political turmoil where Theresa May’s Aid Minister, Priti Patel, resigned following reports that she had several undisclosed meetings with Israeli politicians while on holiday.
The yen rebounded this week by 0.53% to 113.47 on the back of a weaker US dollar. We also noticed October Nikkei Service PMI expanding to 53.4 compared to 51 in the month prior.
However, September machinery orders tanks to -8.1% m/m versus 3.4% m/m in August while the Leading Economic Index slowed to 106.6 in September compared to 107.2 in August.
All Asia-ex Japan currencies depreciated against the greenback except the ringgit, baht and Hong Kong dollar. The baht rose slightly by 0.05% after keeping its interest rates intact at 1.5% as BoT projects economy to expand at a faster pace supported by rising exports, improved domestic demand and expectation of inflation to pick up higher.
Meanwhile, the rupiah lost some traction, falling 0.13% amid the failure of 3Q GDP in meeting expectations at 5.06% y/y compared to 5.01% y/y in 2Q. Indian rupee however was the worst performer in the region, depreciating 0.61% as crude oil prices gained momentum over the week.
The ringgit rallied by 0.71% to 4.2065 against the dollar, also being the best performer in the region after Bank Negara wrapped up its interest decision in line with expectations at 3% but we noticed the market reacted to Malaysia Productivity Corp’s (MPC) hawkish statement for a rate hike in 2018. The ringgit was largely unaffected with September industrial production growing 4.7% y-o-y compared to 6.8% y-o-y in August and September retail sales rising 9.6% y/y versus 12.9% y-o-y in the month prior.