v USD slid against a basket of
currencies after the release of FOMC Meeting Minutes
v Kazakhstan abandons its currency band
and triggered a 20% move; Vietnam devalues the VND by 1% against the dollar
v Positive news assist the Euro’s
advance against the US dollar to near 1-month highs
v Exports slumped in Japan despite the
continued depreciation in the yen
v RM down 1.66% against USD, much higher
compared to average decline of 0.58% in Asian currencies
|
The US dollar
slid 0.8% against a basket of currencies after minutes were released from the
Federal Reserve's most recent policy meeting. The minutes, which were
released just hours after the US inflation data missed expectation, stopped
short of flagging any clear plans to begin raising rates next month. Traders
were disappointed as they believed the Fed will hike US rates at its next
meeting on September 16-17. Policymakers expressed concern about the low
levels of inflation which is an important development given the meeting took
place before the recent China-led plunge in global commodities.
China’s shock
move to effectively devalue its currency remains a risk for global currency
markets with Kazakhstan became the latest emerging market victim of China’s
latest economic risks. The country was forced to abandon its currency band
which triggered a 20% move. The State Bank of Vietnam (SBV) devalued the dong
(VND) by 1% against the dollar on Wednesday—its third adjustment so far this
year—and simultaneously widened the trading band to 3% from 2% previously.
The VND has depreciated nearly 5% so far this year. Even after billions of
dollars’ worth of equity market intervention, the Shanghai composite shook it
off and shed over 8.2%.
Euro continued to
be a risk proxy play. The German parliament backed the latest
€86billion Greek rescue deal, opening the way for the immediate release of
emergency funds to help Greece pay its national debts and refinance its
banking sector. Following the Bundestag vote, the Eurogroup has agreed to
release €26 billion with the positive news assisting the Euro’s advance
against the US dollar to near 1-month highs. Meanwhile, Pound sterling was trading
close to its highest levels since July 2001 on higher-than-expected UK
inflation which was a positive signal for the Bank of England as they
consider a future rate hike. Still, inflation held around zero for the sixth
time in as many months and it has a long way to go to reach Britain’s 2%
target.
Japanese yen
strengthened 0.73% against US dollar as the Japanese economy slumped in Q2
with GDP falling -0.4% from 1.1% growth in Q1. This is a real setback from
Japanese Prime Minister Abe who is fighting hard to reflate the economy and
bring growth numbers. Exports slumped in the world’s third largest economy,
which is surprising given the continued depreciation in the yen thanks to a
stronger dollar.
Asian currencies
with an exception of Singapore dollar were closed broadly lower against US
dollar. Top losers were Ringgit Malaysia, followed by Korean won and
Indonesian rupiah. Foreign selling on local equity markets continued
without any hint of slowing down since start of August. Close to US$1 trillion
of capital has fled emerging markets over the past 12 months as growth
forecasts are being slashed from Brazil to South Korea and cheap USD dollar
funding is slowly coming to a halt.
Ringgit Malaysia
down 1.66% against the US dollar, much higher compared to average decline of
0.58% in Asian currencies despite drop in the 1-month USD/MYR volatility from
last week high of 15.6% to 14.7% and relatively stable 1-month NDF rate.
However, cross SGD/MYR rose from 2.91 on Monday to recent high of close to
2.97 as USD/SGD retraced from high of 1.407 to close around 1.403 while the
commodity prices suffered another bout of selling. Despite all these
challenges, Prime Minister Najib, also the Finance Minister said Malaysia
will not impose capital controls or peg the Ringgit Malaysia to US dollar.
|
INDICATIVE MAJOR CURRENCIES
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
No comments:
Post a Comment
Note: Only a member of this blog may post a comment.