FX UPDATE 04/11/2024

?The Dollar declined on Monday as investors anticipated a pivotal week for the global economy, with the US presidential election approaching and a potential interest rate cut expected that could significantly impact bond yields. US Treasury yields fell by 5 basis points, partially reversing Friday's sharp increase. The Euro maintained its upward momentum, rising 0.5% to $1.0891 and nearing a resistance level at $1.0905. Simultaneously, the Dollar declined by 0.6% against the Yen, reaching 152.60, while the Dollar index edged down 0.1% to 103.80. Democratic candidate Kamala Harris and Republican Donald Trump are neck and neck in opinion polls, with the final result potentially remaining unclear for several days after voting concludes. Analysts suggest that Trump’s policies on immigration, tax cuts, and tariffs could increase inflation, bond yields, and strengthen the Dollar, whereas Harris is viewed as the candidate of continuity, Reuters reports.

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Elsewhere, early on Monday, the British Pound recovered some of its previous losses, trading at $1.2978, although it remained below last week's low of $1.2844. The Bank of England is forecast to cut rates by 25 basis points at Thursday’s meeting. The BoE’s decision has been complicated by a significant sell-off in gilts following last week's budget from the Labour government, which also contributed to a decline in the Pound.

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In South Africa, the Rand strengthened in early trading on Monday amid a softer Dollar, as investors looked ahead to the US presidential election and the Federal Reserve's upcoming interest rate announcement this week. At the time of writing, the Rand was trading at 17.5250 against the greenback, around 0.8% higher than its previous close.

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India’s Rupee fell to a record low on Monday, pressured by ongoing outflows from local stocks, even as most other Asian currencies strengthened due to a weaker US Dollar. The Rupee dropped to an all-time low of 84.11 against the Dollar, slightly surpassing its previous record of 84.0950 reached last week.

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Furthermore, in China, additional stimulus measures are anticipated from China's National People's Congress, which is convening from Monday to Friday. The implied volatility of the one-week Dollar/offshore Yuan surged to a record high, reflecting concerns over the US election's impact on Sino-US trade relations. Sources informed Reuters last week that Beijing is contemplating the approval of over 10 trillion yuan (approximately $1.40 trillion) in additional debt issuance in the coming years to stimulate its fragile economy.

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