Written by Steven Dooley, Head of Market Insights, and Shier Lee Lim, Lead FX and Macro Strategist
Greenback gains after BoC cut
The US dollar hit three-month highs overnight after the Bank of Canda joined the list of central banks announcing larger-than-expected rate cuts.
The BoC cut its benchmark rate by 50bps – its fourth rate cut this year – and lowered the official rate to 3.75% from 5.00% at the start of this year.
The greenback jumped on the news with the USD index up 0.4% overnight. The USD index ended at the highest level since 31 July.
PMIs due
In other markets, the greenback climbed.
The USD was stronger in Asia with the USD/JPY up a massive 1.1%.
The Australian dollar was weaker ahead of key purchasing manager indexes due today. The AUD/USD fell 0.7%. The Aussie is historically closely tied to global growth expectations. The PMI updates will provide the latest reading on the health of major economies. Last month’s PMI broadly showed a slowdown in most key markets.
Ringgit weaker ahead of headline CPI
After recent losses, the SGD/MYR and USD/MYR have both climbed to four-week highs.
Given our expectations of subdued headline CPI inflation for Malaysia, both FX pairs might continue to strengthen.
In September, Malaysian headline CPI inflation is predicted to stay constant at 1.9% year over year, as it did in August.
This is due to a modest increase in food price inflation being offset by a decrease in transportation price inflation.
Lower global crude oil prices have led to further declines in the retail costs of motor fuel.
USD surges in Asia
Table: seven-day rolling currency trends and trading ranges
Key global risk events
Calendar: 21 – 26 October
All times AEST
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*The FX rates published are provided by Convera’s Market Insights team for research purposes only. The rates have a unique source and may not align to any live exchange rates quoted on other sites. They are not an indication of actual buy/sell rates, or a financial offer.
