CURRENCY UPDATE 22/05/2023

The Dollar prolonged its decline against the Euro and Yen on Monday as US debt ceiling talks broke down on Friday. USD fell 0.15% to 137.725 Yen after ending a six-day increase on Friday, edging away from a six-month high. Whereas the single currency rose 0.14% to $1.08205, maintaining Friday’s jump from a seven-week dip. President Biden and House Republican Speaker Kevin McCarthy are due to resume talks on Monday. According to analysts, brinkmanship is forecast to move closer to the so-called “X-date” at the start of next month, Reuters reports. “Have we not seen this movie before?” National Australia Bank strategist Rodrigo Catril stated whilst Westpac strategist Sean Callow referred to it as a “hiccup. The broad outlines of a deal are still in sight.” The greenback will more likely be fuelled by the Federal Reserve’s outlook and “Powell's preference for a pause in June should outweigh any hawkish notes from regional Fed presidents, leaving DXY as a sell on rallies,” Callow went on to say.??

The Dollar index – measuring the currency against six rivals – stood at 103.07 at the time of writing, down from last week’s top of 103.63, a level not seen since 20th March. The index may decline towards the 101-mark, according to Callow, “especially given ongoing ECB resolve on inflation.” Indeed, the president of the European Central Bank, Christine Lagarde said at the end of last week that officials must “buckle up” for “sustainably high interest rates” in order to hit the price target.

In the UK, the Pound rose 0.14% to $1.2464, sustaining its recovery from the three-week low hit last week. Whereas in Australia, the Dollar was flat at the time of writing at $0.6652, Whilst in New Zealand, the Dollar edged up 0.16% to $0.62855, ahead of the central bank’s rate decision on Wednesday, where it is forecast to announce a 25-basis point hike, the Reuters news agency report goes on to add.

Elsewhere, the Chinese Yuan declined to 7.0358 per Dollar in offshore trading, moving back towards the six-month low of 7.0750 on Friday.

In South Africa, the Rand was marginally weaker in early Monday trade. The Rand stood at 19.4975 against the Dollar at the time of writing, a fall of around 0.2% on Friday’s close. South Africa’s currency previously declined to a record low against the Dollar at the end of last week, trading at 19.5225 against USD.