Global Forex Market
THE US dollar slipped by 0.32% to 93.489 to the euro despite the Fed’s expected rate hike to 1.25%-1.50% while increasing economic growth forecast for 2018.
The dollar was weighed as the Fed left its three rate hikes projection in 2018 outlook and 2019 unchanged, following concerns over inflation, and hiccups arising over the tax bill after two Republican senators were reported to have an alternative view on the proposed legislation.
Simultaneously, November core-inflation rose slower-than-expected to 0.1% month-on-month from 0.2% in October while November retail sales accelerated to 0.8% month-on-month compared to 0.5% in the month prior.
Brent crude oil fell by 0.14% over the week to US$63.31 per barrel, despite reaching a peak since June 2015 on Tuesday due to the shutdown of the Forties North Sea pipeline for repairs.
However, the International Energy Agency (IEA) reported US crude output in 2018 is expected to increase by 870,000 barrels per day from 790,000 in November, demonstrating US’ ability to fill any gap in supply which puts a ceiling on price gains.
The euro climbed marginally by 0.04% to 1.1778 against the dollar, paring gains as the European Central Bank (ECB) kept its monetary policy unchanged, weighed down by its president Mario Draghi’s expectation of persistently low inflation below the 2% target for an extended period of time. On a side note, ZEW quarter three employment change maintained at 0.4% quarter-on-quarter while December ZEW economic sentiment fell more than expected to 17.4 from 18.7 previously (consensus: 18.0).
The British pound appreciated by 0.41% to 1.3431, after the British parliament voted in favour of an amendment to Prime Minister Theresa May’s Brexit blueprint to approve the final deal with the European Union.
The pound was further bolstered after the Bank of England’s (BoE) decision to keep rates unchanged at 0.50% following an upbeat statement hinting a further tightening of monetary policy.
The yen climbed against the dollar by 0.96% to 112.39, after a series of positive economic data was released over the week, most of which beat market consensus. These include machinery orders at 5% m/m in October (prior: -8.1%), industrial pro- duction at 0.5% m/m in October (prior: -1%), as well as Tankan large manufacturing index at 25 in the fourth quarter of 2017 (prior: 22).
All Asia-ex Japan currencies appreciated against the dollar except for rupiah and Hong Kong dollar which fell by 0.05% and 0.08%, respectively. The Singapore dollar made the biggest gain in comparison, rising by 0.55% after data showed retail sales rose to 1.5% m/m in October from -4.2% previously.
Other than that, the Indian rupee also firmed by 0.33% amid exit poll predictions for Prime Minister Narenda Modi’s BJP to claim victory at the Gujarat elections despite lower industrial production at 2.2% y/y in October.
The ringgit rose slightly against the greenback by 0.07% to 4.0845, hovering around the 4.08 level throughout the week supported by strong foreign buying interest into the FBM KLCI over the week as it ended 2.30 points higher with a net inflow of RM591.9mil.
Meanwhile, economic data for the past week has been scarce save for industrial production which fell to 3.4% y/y in October from a prior 4.7% and retail sales which rose to 10.9% y/y in October from 9.5% the previous month.