Global Forex Market
THE US dollar rose 1% to close at 93.489 as talks of the Fed considering a total of four rate hikes this year resurfaced.
An upbeat economic outlook and higher inflation expectation saw the US 10-year treasury yields surpass 3.11% levels. Over the week, the positive economic figures also added flavour to the dollar’s rise with April’s retail sales data rising in line with expectations by 0.3% month-on-month (m-o-m) from a 0.8% m-o-m gain in March.
Brent crude oil surged 2.8% over the week to close at US$79.47/barrel. The spike was due to the withdrawal of the US from Iran’s nuclear agreement as well as Washington reimposing sanctions against Iran to curb crude oil exports. Besides, crude oil gained after the US Energy Information Administration (EIA) reported a withdrawal of 1.4 million barrels of crude oil in its inventory.
The euro weakened by 1.2% to 1.180 on the back of the stronger dollar as € Italy seeks to propose a 250bil debt pardon from the European Central Bank (ECB). The currency also suffered due to subdued economic release which includes the EU April inflation slowing down by 0.3% m-o-m from 1% m-o-m in March and 1Q2018 EU GDP second estimate unrevised at 2.5% year-on-year (y-o-y) from 2.8% y-o-y in 4Q17.
The pound depreciated by 0.2% to 1.3518 against the greenback as the UK prime minister denied reports that the UK will remain in the EU customs union beyond 2021. The currency failed to take advantage of April’s Claimant Count which surged to a high of 31.2K, beating consensus’ 7.8K (15.7K in March) and better wage growth of 2.9% y-o-y in April (March was 2.8% y-o-y).
The yen slipped 1.3% to 110.1 on the back of the stronger dollar. Besides, the yen also suffered from poor economic data with 1Q18 GDP preliminary estimates falling for the first time since 2015 and worse than expectation of -0.2% y-o-y to -0.6% y-o-y (+0.6% y-o-y in 4Q17). Adding on, April’s inflation eased to 0.6% y-o-y from 1.1% y-o-y in March, complicating the Bank of Japan’s 2% inflation target.
The majority of Asia ex-Japan currencies weakened against the dollar with the exception of the Philippine peso.The Korean won was down 1.1% for the week as North Korea called off the US-North Korea summit planned since the US insisted North Korea to “unilaterally” abandon its nukes. The rupiah shed 0.7% though the central bank raised the interest rate to 4.5% to stabilise the rupiah owing to the strong US dollar.
The ringgit was softer by 0.5% to 3.9695 primarily due to the stronger dollar. Although the FBM KLCI rose 0.4% to 1,854.4, the market saw a net foreign outflow of RM2.2bil.