Global Forex Market
THE US dollar continued its losing streak this week, sliding against a basket of major currencies by 0.52% to a 3-year low of 90.498 due to the euro’s rally, mixed bag of data and concerns of a possible US government shutdown.
Data showed weaker-than-expected NY Empire State and Philadelphia Fed Manufacturing Indices in January of 17.7 and 22.2, respectively.
Meanwhile, initial jobless claims for the week ending Jan 13 fell to 220,000 from 261,000 previously, beating expectations of 250,000 while industrial production in December rose 0.9% month-onmonth (m-o-m) from a fall of 0.1% m-o-m in November, surpassing an expected rise of 0.4%.
The price of Brent crude oil declined 0.8% to US$69.31 per barrel, pressured mostly by a recovery in US oil production as reflected in the higher number of active oil rigs at 752 from 742 according to Baker Hughes, as well as a sharp fall in US crude inventories of 6.86 million barrels (double the market consensus).
However, the bullish bias on prices has not been eliminated amid militant threats towards the oil sector in Africa’s largest exporting country Nigeria.
The euro climbed over the week by 0.3% to 1.2238, supported by a wider November eurozone trade surplus of 26.3bil from 18.9bil in October. Further gains were capped by news that the Social Democrats (SPD) refused to work with the Christian Democrats (CDU) to form a German coalition and dovish comments by European Central Bank’s vice-president Vitor Constancio, who stated that changes to the central bank’s forward guidance would not be immediate as inflation remained below the 2% target.
The pound surged by 1.21%, reaching a post-Brexit high of 1.3894 led mainly by the weaker greenback. During the week, core inflation in December eased to 2.5% year-onyear (y-o-y) from its six-year high of 2.7% y-o-y in November while headline inflation also moderated to 3% y-o-y after hitting its fastest rate in six years of 3.1% y-o-y.
The yen softened against the US dollar by 0.05% to 111.11, despite the latter weakening further throughout the week. Data showed Japan machinery orders increasing by 5.7% m-o-m in November 2017, largely beating market consensus of minus 1.4%, indicating that investment spending had been on the rise, which bode well for the yen.
All Asia-ex Japan currencies strengthened against the US dollar except the Indonesia rupiah, Indian rupee, Philippine peso and South Korean won. The offshore Chinese yuan was the best performer this week, having gained 0.58% underpinned by the weak dollar.
Meanwhile, the won, the worst performer for the week, fell 1.01% as Bank of Korea kept rates unchanged at 1.50% amid internal and external uncertainties while inflationary pressures remained stable.
The ringgit’s strengthening from last week proved to be persistent, making a gain of 0.43% to close at 3.955 as of Thursday. The FBM KLCI saw a large net foreign inflow of RM773.2mil over the week, ending at 1,821.60 on Thursday. The sole economic data for the week was unemployment rate, which came in slightly lower than before at 3.3% in November (consensus: 3.4%).