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DAILY BRIEF

 

 

The Daily Brief is a free email sent out each morning with information about overnight market movements and insights into the issues of the day. The brief is free and will help you keep an up-to-the-minute eye on the currency markets.

25 / 05 / 18

LONDON OFFICE

 

Euro

Reuters: The euro edged down 0.1 percent to $1.1710, and was on track for a sixth consecutive week of falling against the dollar, hobbled by worries over a deepening economic slowdown in the currency bloc. Six straight weeks of losses would be its longest such streak since January 2015. Also weighing on the euro was the insistence of the far-right League, a partner in Italy’s planned coalition government, that eurosceptic economist Paolo Savona be appointed economy minister.

 

“I think the risk-off vibes will likely persist as ‘two lira’ issues also linger,” said Yoshinori Shigemi, global market strategist at JPMorgan Asset Management, referring to the Turkey, whose lira is sinking, and Italy, whose new eurosceptic government may want to re-introduce lira. Turkey's lira weakened 0.9 percent, retreating further from hefty gains made on Wednesday when the central bank raised interest rates 300 basis points.

 

US Dollar

Reuters: The dollar index .DXY, which measures the greenback against a basket of six other currencies, was up 0.2 percent at 93.912 and not far from the five-month high it hit on Wednesday.

 

The dollar had been rising for weeks on its widening yield advantage but lost some of its momentum after minutes of the Federal Reserve’s last policy meeting published on Wednesday were seen as more dovish than markets had expected.

SOUTH AFRICA OFFICE

 

South African Rand

BD Live: The rand could strengthen towards R15 to the pound should Britain experience a hard Brexit from the EU in coming months, Investec said on Thursday. This rand appreciation would also require that US interest-rate expectations do not increase at the same time, although it seemed that debate within the US Federal Reserve had begun pointing to a lower, as opposed to higher or neutral, US rate, said Investec chief economist Annabel Bishop. This could see the rand trending towards R15 to the pound by 2020, which level it hasn't seen since 2013. In January 2016, the rand hit its lowest level ever, at nearly R26 to the pound.

 

"While SA is not expected to necessarily see direct financial turbulence due to a hard Brexit, risk-off sentiment would likely rise, a negative for emerging-market currencies," said Bishop. Furthermore, the anticipated sharp fall in UK confidence measures would negatively impact UK growth, with the EU not expected to escape unscathed. Brexit negotiations have reached a critical phase, largely centred on border issues with Northern Ireland. The Bank of England (BoE), which, earlier this month, opted to leave interest rates unchanged, has also cited the possible financial turbulence from the divorce with the EU as the primary risk facing the pound. Prior to the BoE decision, an interest rate increase had been factored in by the market. On Thursday, the rand was mostly flat against the pound at about R16.65.

 

Japanese Yen

Reuters: The yen stepped back from a two-week high against the dollar on Friday when North Korea said it was open to resolving issues with the United States after President Donald Trump called off a June summit with its leader, Kim Jong Un. Although the yen and the safe-haven Swiss franc had gained on Thursday in response to heightened worries over global politics, traders were quick to lock in gains ahead of a long weekend in the United States and Britain.

 

“The risk-off mood eased a bit after North Korea said it’s open to talks during early Asian trade,” said Shuntaro Ikeshima, chief manager of forex and financial products trading division at Mitsubishi UFJ Trust and Banking Corp. The yen fell 0.3 percent to 109.59 yen JPY= in Asian trade following conciliatory comments from North Korean Vice Foreign Minister Kim Kye Gwan. It had hit a two-week high of 108.955 per dollar overnight in a knee-jerk reaction after President Donald Trump called off the planned summit with Kim. Trump blamed the cancellation on what he said was Pyongyang’s “open hostility,” and warned that the U.S. military was ready in the event of any reckless acts by North Korea.

 

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