Foreign Currency Update

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Foreign Currency Update.

The dollar has had rather a flat month with the DXY Dollar index, (an index that measures the US Dollar’s value against a number of other currencies), moving between 95.5 and 94.1 and settling at 95.37. This consolidation comes after several months of a strengthening dollar so it could signal a pause before another leg higher rather than a reversal. However much depends on the outlook for U.S. interest rates and with the benchmark 10 year yield falling back below 2.9% rates seem to be muted for now. Look out for hints from the Federal Reserve for the direction of future rate policy. Against the Thai Baht, the U.S. Dollar actually advanced fairly significantly from 32.43 to 33.41 indicating weakness in the Thai baht.

There has been no real respite for those with a bullish outlook for the British Pound as it stayed range bound at its recent lows and then resumed a move even lower again. It just goes to show that in the currency markets, enough is never enough. The British Pound moved from 1.3150 against the U.S. Dollar to 1.3310 before retreating back to 1.3200 and then down to 1.3024. The move could be attributed to a possible no-deal Brexit scenario, as well as senior resignations from the UK Government surrounding the ongoing Brexit negotiations. Against the Thai Baht the British Pound managed to negate its weakness due to the softer Thai baht, moving from 43.04 to 43.44.

The US Dollar vs. Japanese Yen cross rate was the big mover rising from 108.80 to 113.05, a steep climb. Of course the higher the cross rate, the weaker the Yen so it’s actually a steep descent for the Japanese currency. This was also against a flat dollar indicating that the Yen itself was behind the move. It may also be driving the trend of other Asian currencies weakening. Against the Thai Baht, since it weakened also, the net result was a flat month with the currency moving just slightly from 0.2934 to 0.2936

Despite one or two dips below 62 to the U.S. Dollar, the Russian Ruble was largely flat against its American counterpart. It moved from 63.68 to 63.36 in trade that was choppy but constrained. The Trump-Putin summit did little to affect the value of the Russian currency. Against the Thai Baht, the Ruble was up from 0.5160 to 0.5500 reflecting Thai baht weakness during the period.

The Euro has suffered a similar fate as the British Pound of late, consolidating after a significant sell off during the past few months with little in the way of a rebound. Attempts to break the Euro through 1.1750 against the US Dollar failed and the Euro settled at 1.1616. Whether further falls are ahead is difficult to tell but the weakness certainly persists for now judging by the inability of the Euro to climb meaningfully from its lows. Against the Thai Baht, the Euro rose from 37.60 to 38.75 due to Thai baht weakness.