Foreign Exchange Report - 26.06.2023

The Euro pared some of last week’s losses on Monday, to trade 0.05% higher at $1.0901 in Asia trade. At the end of last week, the single currency declined to a one-week low as data revealed eurozone business growth came to a virtual standstill this month due to a worsening downturn in manufacturing activity and slow growth of the eurozone’s services industry. Whereas Sterling edged up 0.11% on Monday to $1.2730, reversing some of the currency’s 0.8% fall last week following the Bank of England’s 50 basis point rate hike fuelling UK recession fears. Purchasing Managers’ Index (PMI) data published on Friday revealed the UK economy showed signs of a slowdown in June, yet inflationary pressures remained elevated.

In the US, the Dollar steadied against a basket of currencies to 102.74, following a gain last week of over 0.5%, the first in almost a month, Reuters reports. Business activity fell to a three-month low this month, with a deeper contraction in the manufacturing sector. However, the overall picture showed economic growth rose between April and June. “Again, (there was) another set of weak PMI data coming out of Europe. By contrast, PMI data in the UK and the US continue to be pretty solid in the face of aggressive interest rate hikes,” said Commonwealth Bank of Australia, currency strategist, Carol Kong. “The aggressive monetary tightening in the major economies ... will likely continue to see the global economy continue to deteriorate, which will underpin the safe haven US Dollar.”

Russia’s Rouble opened on Monday close to a 15-month low against the Dollar. At the time of writing, the Rouble was down 2.1% against the greenback at 86.50, after previously hitting 87.2300, its weakest level since March last year. Whereas Russia’s currency lost 2.2% against the Euro at 94.37 and edged down 2.1% against the Chinese Yuan at 11.95.

In Japan, the Yen increased over 0.2% to 143.39 per Dollar, yet wasn’t far away from more than a seven-month low of 143.87 reached at the end of last week. A policymaker at the central bank has called for an early revision to the yield curve control, whilst Japan’s top currency diplomat, Masato Kanda said on Monday authorities wouldn’t rule out options to make an appropriate response to excessive currency moves. Japan’s currency has faced new pressure over the past few weeks amid the contrast between the Bank of Japan’s ultra-dovish approach and a hawkish stance from other central banks.

Elsewhere, in China the onshore Yuan declined more than 0.5% to a seven-month low of 7.2199 per Dollar, tracking the offshore Yuan, which last week weakened past 7.2 per Dollar. At the time of writing, the offshore Yuan was down 0.1% at 7.2214 per Dollar.

In India, the Rupee was trading higher on Monday at 81.9525 to the Dollar, a rise from 82.0350 during the previous session. Over the past fortnight, USD/INR has found support at the 81.80-81.90 level. “Think this week too, 81.80 will be difficult to take out and we will just amble along in a narrow range,” said an FX trader.

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