Foreign Exchange Report - 21.08.2023

Following five consecutive weeks of gains, the Dollar held firm on Monday, as investors focused on the Federal Reserve’s upcoming Jackson Hole symposium. The greenback gained 0.7% against the Euro last week, edged up against the Japanese Yen and rose more than 1% against the Australian and New Zealand Dollars, as US Treasury yields soared in anticipation of rates remaining higher for longer. The Dollar index – measuring the currency against six rivals – was down 0.06% at the time of writing to 103.33, close to Friday’s two-month top of 103.68. The Euro rose to $1.0885, whilst Sterling was trading at $1.2726, and the Swiss Franc stood just over a six-week low reached last week at 0.88 per Dollar.

In Australia, the Dollar was trading at $0.6402, whilst the New Zealand Dollar stood at $0.5919, close to the nine-month lows hit last week as a rate cut in China frustrated markets concerned about a stalling economy, Reuters reports. China slashed its one-year benchmark lending rate by 10 basis points and kept the five-year rate the same. The Yuan fell to the weak end of 7.3 per Dollar, despite the central bank’s fixing of the trading range.

Furthermore, there was little change for the Indian Rupee on Monday, despite a decline in other Asian currencies. At the time of writing, the Rupee stood at 83.10 to the Dollar, whilst the Chinese Yuan, Indonesian Rupiah and Korean Won all declined 0.3%. “Again, Rupee is managing to avoid a fall to record low. RBI (Reserve Bank of India), at least for now, looks to want to keep rupee hovering around the 83 handle,” according to a forex trader. The central bank likely intervened in the face of a buoyant US Dollar. “For the Rupee, as long as the RBI defends 83.15, Dollar bulls shall remain at bay,” said Amit Pabari, managing director of CR Forex. “In the short run, the pair is likely to remain caged in the 82.75-83.25 levels.”

Elsewhere, the South African Rand edged down in early Monday trade during a week containing the BRICS summit of emerging market economies and monthly inflation data. The Rand stood at 19.0300 against the Dollar, down 0.2% from the previous close. So far this month the Rand has fallen more than 6% and by nearly 12% year-to-date. South Africa is hosting the BRICS summit from Tuesday to Thursday, welcoming leaders from China, India, Brazil and Russia. Furthermore, South Africa’s July consumer price index will be published on Wednesday.

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