Fx Markets 1 Dec. 2016

The U.S. dollar hit its highest level against the yen in 8-1/2 months on Wednesday and also surged against the euro and Swiss franc after a surge in oil prices pushed U.S. Treasury yields higher, while strong private payrolls data bolstered expectations for a hawkish Federal Reserve next year. The dollar was last on track to gain about 9% against the yen in November to mark its strongest monthly performance since August 1995. The dollar index, which measures the greenback against a basket of six major currencies, was last up 0.55% at 101.48.
The US dollar rose about 1.8% against the yen to 114.35 yen, its highest level since early March. The euro fell about 0.8% against the dollar to a session low of $1.0554 after U.S. crude prices rallied more than 8.5% as some of the world’s largest oil producers agreed to curb oil output for the first time since 2008. But have reversed to trade down 0.5% at 1.06. The US dollar also hit a roughly 10-month high against the Swiss franc of 1.0204 francs, but have last settled down 0.49% at 1.016.
Sterling surged back to an 11-week high against the euro in late trade in London on Wednesday, racking up its best month since January 2009 as a deal to cut OPEC oil output weakened the single currency against the dollar. The pound had suffered earlier, with dealers citing month-end rebalancing by investors after what was also its strongest performance against the dollar since April. The cable is expected to finish in the green and now trades above $1.25, up 0.16% at $1.2515 The pound has gained 1.7% against the dollar in November, breaking a losing run that dates back to April and the lead-up to Britain’s surprise vote to leave the European Union on June 23.
The Canadian dollar strengthened against its firmer U.S. counterpart on Wednesday as oil prices jumped immediately after an OPEC output cut announcement and data showed the domestic economy grew in the third quarter at the fastest pace in more than two years. But much of the gains made earlier in the trading session was reversed to be up 0.1% at 1.3420. The currency’s weakest level of the session was C$1.3453, while it touched it’s the strongest since Nov. 9 at C$1.3353.
Australian dollar was smashed overnight down 1.35% against its US counterpart. AUD/USD second worst performing currency on Wed after JPY, sheds 1.5%. Triple failure @ 0.7490-0.7505 res, base metals pullback, USD strength weigh. China liquidity fears trigger exodus from steel to rubber. Markets focussed on AU Q3 CAPEX and China PMI numbers today. Strong support @ 0.7355-65, loss to yield 0.7286-0.7305, res @ 0.7430-35


NZD’s intra-week rally extended to 0.7170 in early Ldn then off. First-up selling reset e/r c0.7130 area before USD firmed on local data beats. Kick-up in US Trsy yields fuelling broad-based USD gains lifting DXY c1%. Mth-end flows into Ldn fix steered NZD/USD sub-0.71 to 0.7071 base. Custodian flows flipped 180 degrees with NZD slated in top three ccys sold. Q3 trade bal -1.8% ignored, US trends back in ascendancy as end-mth clears
China’s Yuan firmed against the dollar on Wednesday, supported state-owned banks selling dollars for a third consecutive day, but the Chinese currency was still poised to post its worst month since a one-off devaluation in August 2015. The Yuan climbed to its strongest level in more than a week on Wednesday morning, supported by continued dollar sales by state banks and verbal support from policymakers after the currency had sunk to more than 8-1/2 year lows earlier. The Yuan has lost more than 6% of its value against the dollar so far this year. Some analysts expect the government to continue taking steps to dampen expectations of further depreciation.
South Africa’s rand weakened as traders treaded cautiously ahead of major data releases late this week, with Standard & Poor’s the last of three main rating agencies to decide on the country’s debt. The rand had slipped 1.45% to 14.073 per dollar following an overnight close of 13.8825, bringing the month’s losses to more than 4%. The rand and other emerging currencies fell after a jobs report from the United States showed a surprise increase in employment, further solidifying bets the Federal Reserve will raise rates next month. The rand began the week on the front foot after Fitch and Moody’s affirmed South Africa’s investment grade status over the weekend, but has since retreated due to a dollar surge and worries that S&P’s may buck the trend and cut the rating to junk.
Venezuela’s bolivar currency tumbled past the psychological barrier of 4,000 per dollar on the black market on Wednesday, racking up a 10% depreciation since Monday and fuelling concerns about the crisis-stricken OPEC nation’s economy. The black market rate has weakened 62% this month amid Soviet-style product shortages and a crippling recession that have become the norm in Venezuela’s steadily unravelling socialist economy. The rate reached 4,121 according to website DolarToday, which is a primary reference for the black market rate even though President Nicolas Maduro as well as many of his critics complain the rate lacks transparency and is subject to manipulation.
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