Foreign Currency Update

Foreign Currency Update.

The U.S. Dollar fell against a number of currencies as interest rates were cut again in the U.S. and expectations of further rate cuts increased. The DXYDollar index, an index that measures the U.S. Dollar’s value against a basket of major currencies moved from 98.24 to 97.14 in almost a straight line as other currencies gained ground. Against the Thai Baht, the U.S. Dollar gave up just a small amount of ground moving from 30.45 to 30.26, indicating that the Thai Baht also weakened along with the U.S. Dollar during the period.

The Pound reacted positively to news that a no-deal Brexit is more likely to be averted, though many uncertainties remain. At the time of writing the EU and the UK had agreed a framework for a new deal, but passing it through the UK’s house of commons appears to still be a sticking point. Yet in spite of this the pound staged its biggest 6-day rally since 1985, moving from 1.2320 to 1.3012 before dropping back slightly to 1.2905. Another driver of the move was an expectation that some of the uncertainty might be coming to a close, although this may prove elusive. Of course, future movements will depend on Brexit developments and indeed there are plenty of hurdles ahead. From a technical analysis viewpoint, the Pound looks considerably stronger than previously with some analysts suggesting that there could be increased buying activity if there is a sustained move above the 1.3000 level. Against the Thai Baht, the Pound moved from 37.45 to 39.30, a move of nearly five per cent. Expect volatility to remain heightened as currency traders jostle for position.

The U.S. Dollar vs. Japanese Yen cross rate remained range bound but saw some surprise moves as it moved from 108.10 down to 106.71 and then back to 108.35. Whilst the U.S. Dollar weakened, the Yen weakened even more. This phenomenon is likely due to the “risk-on” trade on global stock markets taking hold that erodes the Japanese Yen’s strength as a safe haven currency. The Japanese Yen vs. Thai Baht spot rate fell from 0.2801 to 0.2770, further indicating Yen weakness.

Some choppiness has started to exhibit itself when looking at the Russian Ruble against the USD. The Ruble weakened from 64.02 to 65.38 only to return back to below 64 at 63.69. Against the Thai Baht it was trading almost totally flat moving from 0.4750 down to 0.4650 before recovering back to 0.4750

The Euro / U.S. Dollar exchange rate spent much of the time below the key 1.1000 handle before rallying to 1.1174 on the back of positive Brexit news flow. A weaker dollar also helped to boost the Euro even in spite of a continued dovish stance on the part of the ECB. Against the Thai Baht, the Euro dipped to 33.19 before regaining ground and moving up to 33.83.