Foreign Currency Update

Foreign Currency Update.

The dollar rose quite sharply due to emerging markets becoming jittery about the Turkish Lira. The DXY Dollar index, (an index that measures the US Dollar’s value against a number of other currencies), rose from 95.37 to 96.46, and momentum appears to still be building. This move is in spite of the fact that yields on the 10-year treasury remained below 3 per cent and even fell back to 2.875 per cent. Against the Thai Baht, the U.S. Dollar was somewhat flat moving from 33.41 to 33.38, indicating that the Thai Baht strengthened to the same extent.

It was another disappointing month for anyone holding British Pounds and/or hoping they will appreciate. There was some speculation that the big fall from 1.4320 to the US dollar down to 1.3100 might come to an end with a bounce through 1.3315, but all hopes were dashed when the pound broke through the key 1.3000 barrier. This lead to a quick fall to 1.2684 with the potential for even more downside to come. The continued Brexit uncertainty is unlikely to be resolved quickly and since this appears to be a catalyst for the pound’s poor fortunes of late, the story should be closely watched. Against the Thai baht, the pound moved from 43.42 to give up the 43 level and drop down to 42.29, its lowest level for a year.

The US Dollar vs. Japanese Yen cross rate actually fell from 113.05 to 110.38. When the rate falls it means 1 U.S. Dollar buys less Yen and therefore the Yen has strengthened even faster than the dollar has. The fact that the Yen is considered a “safe haven” currency at times of uncertainty could explain the move. Yet a stronger Yen will not help put the Japanese economy, which relies on the Yen being relatively weak in order to attract export sales. Against the Thai Baht, the Yen strengthened against the Thai baht from 0.2936 to 0.3001, the first time it has surpassed the 0.3000 level in many months.

Due to ongoing sanctions and the announcement of additional ones by the U.S., the Russian Ruble took a tumble against the dollar to hit 69.03 from 63.36, before settling at 68.15. The move was swift and represented around a seven per cent depreciation. It would be worth watching the news flow to see how it further affects the Russian currency.  Against the Thai Baht, the Ruble fell quite dramatically also, from 0.5505 to 0.4901.

The Euro broke below the 1.16 level to the U.S. Dollar and fell rapidly to 1.1335, in a large part due to the concern about European banks’ exposure to the Turkish Lira. There appears to be no sign of a reversal yet and a move even lower cannot be ruled out. Against the Thai Baht, the Euro fell nearly a whole baht from 38.84 to 37.85.