Foreign Currency Update


The US Dollar has lost some ground in the last few weeks with the DXY index, an index that measures the dollars strength compared to a basket of other currencies, breaking through the important 100 mark to fall to 98.5 before recovering to 99.4. The Dollar had been trading to as high as 104 previously.  Much of the Dollar’s strength has been due to a rise in European currencies as these are in the basket that makes up the DXY index. The Thai baht also weakened, and in fact at a faster rate than the USD, so the net effect has been a slightly better Thai baht rate for USD holders, rising from 34.36 to 34.76.

The British pound continued to strengthen after jumping on the news that a snap election would be held. It is unclear why this would be seen as a positive move for the currency but traders certainly bought with gusto. The Pound jumped out of its 1.23 to 1.25 range to sit at 1.28 and has since risen further to 1.2977, just shy of the important 1.30 marker, before dropping back to below 1.29. The chance or a softer Brexit may be one of the reasons, but it is unclear how this might come about. Against the Thai Baht, the pound now fetches a more respectable 45.07 vs. 42.90 before the news. However the spread at currency exchange booths may be high due to continued volatility.

The USD/JPY cross has seen a relentless rise sparked by the first round of the French election news. It moved from 109 to 114 in virtually a straight line. Of note is that when this cross moves higher it is actually the Yen moving lower, as it denotes how many Yen a single dollar can buy. The Dollar therefore has been moving higher against the Yen and the Yen has been weakening markedly. This is quite a feat when you consider that the Dollar has also been weakening in the main. Whilst there are some calls for 115.50 there are plenty of traders looking for a return to 109 and below. The Yen is typically viewed as a “safe haven” currency. When there is risk aversion and stock markets fall, (risk-off), the yen is bought and rises in value. The reverse often occurs when stock markets are bullish and in a risk-on trade, the Yen falls.

The Russian ruble has actually weakened against the USD, but because the Thai baht has also weakened the pair managed to remain steady. The Ruble at one point climbing to 0.615 to the Thai baht before falling back to 0.599. The Ruble has been little affected by happenings in Europe such as the Brexit negotiations, and the UK and French Elections, even though these have affected world markets on a grand scale. Expectation is for generally stable outlook.

The Euro rose sharply after the first round of the French elections taking it out of the 1.055 to 1.069 area to move to 1.095. A test of 1.10 was expected after the second round of the elections in France, but this did not materialize and the single currency paired its gains and dropped back to 1.0850 to the USD before regaining some strength to trade at around 1.0860 to 1.0920. Then a week later it broke the 1.10 level in style to reach 1.1123. Against the Thai baht the Euro is fetching 37.85 up from 36.77 previously.