Foreign Exchange Report - 27.06.2022

Both the U.S. Dollar and Yen gained support in Monday’s Asia trading, as investors seek safety over soaring rate fears and as weakening economic data indicates a global recession could be on the cards. According to a survey carried out at the end of last week, U.S. consumer confidence is at an all-time low, further prompting investors to reduce bets on rate hikes. However, further declines have been sidestepped on the threat of economic slowdown concerns and a Dollar-denominated preference during such times, Reuters reports. "The Dollar tends to rise when people worry about a global recession," stated Commonwealth Bank of Australia strategist Joe Capurso. Traders now forecast the Federal Reserve’s benchmark funds rate will steady around the 3.5% mark as from March 2023, a retreat from rates moving up to 4% next year. The Yen stood at 134.81 per Dollar, whilst the U.S. Dollar index – measuring the greenback against six major peers - steadied at 104.000 after hitting a 20-year high of 105.79 earlier in June.

Elsewhere, the Euro was trading at $1.0564 at the time of writing, and Sterling held at $1.2285. “GBP/USD may stay in the 1.22-1.23 range for now, while EUR/GBP may keep inching lower towards the lower half of the 0.8500-0.8600 range,” said Chris Turner, ING global head of markets.

In addition, the Australian Dollar was down 0.1% at $0.6935 during trading in Asia on Monday morning and the New Zealand Dollar was trading at $0.6321.

In China, factory activity data set to be published this week may indicate whether the economy is beginning to gain pace following the impact of the Covid lockdown restrictions. The Yuan received a boost at 6.6856 per Dollar, following a statement by Shanghai Communist Party chief Li Qiang saying authorities had "won the war to defend Shanghai" against Covid.

Furthermore, the Russian Rouble declined to 53.60 per Dollar as the country was facing its first sovereign default in decades. "Since March we thought that a Russian default is probably inevitable, and the question was just when," said Dennis Hranitzky, head of sovereign litigation at law firm Quinn Emanuel. "OFAC (Office of Foreign Assets Control) has intervened to answer that question for us, and the default is now upon us."

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