Foreign Currency Update

Foreign Currency Update.

The U.S. Dollar strengthened in value during the first part of the month as stocks rose to record highs even in spite of corona virus fears rising. However, a breaking point came and both stock markets and the dollar fell quite dramatically. The DXYDollar index, an index that measures the U.S. Dollar’s value against a basket of major currencies, increased from 98.45 to 99.9, almost touching the all important 100 mark before declining quickly to 95.1 and then settling around 97.3.Stock market declines prompted the U.S. Federal Reserve to cut rates twice in emergency meetings, but other central banks were also looking to cut rates worldwide ensuring that U.S. Dollar falls were curtailed somewhat. The USDTHB cross rate actually rose even in spite of Dollar weakness signifying that the Thai Baht also weakened during the period, at a rate slightly faster than that of the Dollar’s. Against the Thai baht the Dollar rose from 31.13 to 32.17.

The UK’s historic departure fromthe EU did not move the British Pound, with the volatility in stock markets and central bank intervention having taken a front seat. Against the U.S. Dollar, the pound sat in a range of 1.2885 to 1.3030 but eventually gave up the 1.2800 level and hit a low of 1.2772 before moving back above 1.3200. Then as market volatility picked up and the BoE cut interest rates by 50 basis points, the pound quickly fell to 1.2275. A largely non-existent response from the UK government to the Covid-19 situation also arguably contributed to the declines. As the pound has fallen this has been reflected in the GBPTHB rate, which moved from 41.32to 39.51

The U.S. Dollar vs. Japanese Yencross rate moved from 112.06 to as low as 102.07, before recovering to 105.35. These moves occurred as the Yen cemented its position as a safe haven currency at times of stock market volatility. The move was nearly 10 per cent and it is expected that as stock markets remain under pressure the Yen will still see inflows. The JPYTHB cross rate saw the Yen fetching 0.3033 Thai Baht, up from the 0.2782 level before stocks started to take a dive.

The Russian Ruble saw additional volatility weakening from 63.05 to 74.83 against the US Dollar. This was a more volatile month than has been seen for several months before and could signify a new trend. Much depends on the direction of the Dollar. Against the Thai Baht the Rublelost ground, moving from 0.495 to 0.430.

The Euro / U.S. Dollar exchange rate moved quite quickly from 1.0804 to 1.1448 before giving up some of the gains to trade down to 1.1116. It has acted as the other side of the trade for Dollar weakness, since the basket of currencies that make up the dollar index are mostly weighted towards the Euro. It has also made gains where the British pound made losses. Against the Thai Baht, the rate rose from 34.23 to 35.89.