Foreign Currency Update

Foreign Currency Update.

The U.S. Dollar has maintained its status as a safe haven currency even in spite of the fact that U.S. interest rates have dropped to zero and unlimited QE is the order of the day. The DXY Dollar index, an index that measures the U.S. Dollar’s value against a basket of major currencies, rose from 99.0 to 100.5 before settling at 98.9. Levels that remain around the 100 mark indicate strength. Against the Thai Baht the rate fell from 32.51 to 31.84 indicating that the Thai Baht itself has strengthened over the last month by around two per cent. This could be in part due to the low number of new corona cases in the Kingdom that may bode well for future economic activity.

The British Pound dropped from 1.2596 all the way down to 1.2107 against the U.S. Dollar, before recovering slightly to 1.2268. A weak UK economy is expected due to the arguably late response to the Corona outbreak and this may have weighed on the pound. Also, something that is all too easy to forget, is that the menace of Brexit uncertainty still hangs over the currency. Negotiations regarding the end of the 11-month transition period (due at the end of Dec 2020) have stalled with no real progress being made on significant matters. At the same time the UK side is adamant that it will not extend the date even though a great deal of time may have been lost to the Covid outbreak. The 1.2500 level against the U.S. Dollar will be a key gauge of the outlook for the Pound going forward. Against the Thai baht the Pound also fell in a constant fashion from 40.91 to 38.80 before recovering slightly to 39.23

The Japanese Yen has not had a look in as regards its traditional status as a safe haven currency with the U.S. Dollar taking the crown for the time being. The U.S. Dollar vs. Japanese Yen cross rate moved from 106.40 to 107.71, indicating that the Yen weakened by just over 1 per cent.

The JPYTHB cross rate fell quite dramatically from 0.3033 to 0.2932 as a result of the Yen’s weakness combined with Thai Baht strength.

The Russian Ruble strengthened from 74.33 to 70.92 against the US Dollar, capping another fairly volatile month. Once again the more than 5 per cent move was mainly with the Ruble rather than the Dollar. Against the Thai Baht the Ruble strength was evident as it moved from 0.440 to 0.450.

The Euro / U.S. Dollar exchange rate was choppy, moving from 1.1010 to 1.0783 before returning to the 1.1000 handle again. Currency traders are undoubtedly watching out for news of ECB and other European stimulus packages. Against the Thai Baht, the rate fell from 35.73 to 35.02, a move of nearly two per cent.