FX UPDATE 21/10/2024

 USD edged up on Monday, with the Dollar index, measuring the currency against six major rivals, increasing by by 0.17% to 103.65. It declined by 0.3% on Friday as risk appetite surged across markets following China’s announcement of additional details regarding its extensive stimulus package; however, it still recorded a 0.55% increase for the week. The greenback’s strength has “in large part been a rates and relative growth story,” according to Erik Nelson, macro strategist at Wells Fargo. “You've had some relatively solid US data, starting with the jobs report earlier this month. You've had decent retail sales, GDP is tracking pretty well this quarter. On the other side Europe's not doing quite as well, the ECB is on the dovish side… so it's been this divergence story.” Analysts say that polls indicating increasing chances of former President Donald Trump winning the 5 November election are bolstering the Dollar against various currencies. Trump’s proposed tariff and tax policies are perceived as likely to maintain high US interest rates, which could negatively impact trading partners.

In Japan, the Yen fell 0.2% to 149.84 per Dollar but remained above the 150 per Dollar mark after briefly crossing that threshold last week for the first time since early August, Reuters reports. The most straightforward way to address the risk posed by Trump’s tariffs was to buy Dollars against the Euro, Swiss Franc, and Mexican Peso, said Chris Weston, head of research at Pepperstone. “Traders need to decide if now is the right time to start placing election trades with greater conviction,” Weston said. Last week, the Yen declined by 0.3%, the Euro dropped by 0.6%, and the Pound remained unchanged. Meanwhile, the Mexican Peso fell by 3%. 

The single currency has dropped over 3% in the past three weeks, falling below its 200-day moving average and is currently close to a 2.5-month low. At the time of writing, the Euro was down 0.16% to $1.0849, whilst Sterling fell 0.2% to $1.3022.

In addition, the Pound to Australian Dollar exchange rate is currently stable, but there is little chance for a significant increase in the near term. GBP/AUD is gradually rising, remaining above the nine-day moving average on the daily chart, which is currently at 1.9438 - a level that has offered support throughout October, Pound Sterling Live reports. This technical indicator is trending upward, suggesting the potential for a series of “higher lows” in the upcoming days, which could push GBP/AUD towards the previous week’s high of 1.9586.

Elsewhere, in India, there was barely any change for the Rupee on Monday as the pressure from outflows was offset by Dollar offerings from state-run banks. Traders anticipate that the Reserve Bank of India (RBI) will intervene to protect the currency from significant declines. The Rupee stood at 84.07 against the US Dollar at the time of writing, slightly up from its previous close of 84.0650. The local currency fell to an all-time low of 84.0775 on Friday, but the losses were limited due to intervention from the central bank.