Foreign Exchange Market Update
March 30, 2017
Indicative Interbank spot sell rates only as of 9:00 AM PST.
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United Sates (US) GDP was revised higher by 0.2 percentage points to 2.1% in this third estimate for 2016 4th Quarter. This compared with market expectations for an upward revision to 2.0%. Economic activity is now 1.9% above its year ago level. In final sales categories, consumption, imports, and residential investment were revised higher, while net exports, fixed investment, and government purchases were revised lower. As a result of all of these changes, real final sales was revised up by 0.1 percentage points to 1.1% while real domestic demand was revised up by 0.3 percentage points to 2.8%.
Australia’s dollar traded at 76.58 U.S. cents at 11:02 AM PST and New Zealand dollar traded at 70.08 U.S. cents. Job vacancies in Australia have risen for a third straight quarter to hit the highest since May 2011. Total job vacancies increased 1.8% to 185,600 seasonally adjusted in the December-February quarter, from 182,400 in the three months to November. Vacancies were 7.3% higher than in the same period of 2016. That was welcome news because employment growth has been disappointingly sluggish for some time and heavily skewed to part-time work.
Euro traded at 1.0694 against USD at 11:02 am PST. German consumer prices rose 0.2% in March compared with consensus estimates of a 0.4% increase. The year-on-year rate declined to 1.6% from 2.2% previously which was also below consensus expectations of 1.9%. Energy prices rose 5.1% in the year to March from 7.2% previously and this lowered the annual rate in goods prices to 2.5% from 3.2% previously. There was a sharp slowdown in the annual rate of services-sector inflation rate to 0.7% from 1.3% previously even though the annual increase in rents held at 1.6%.
Onshore Chinese yuan traded at 6.8870 per USD at 11:02 am PST and offshore Chinese yuan traded at 6.8786 per USD. The Chinese yuan has been steadily losing its attraction, per a report by Swift payment system. As an effect of economic stagnation, uncertainties surrounding high levels of domestic debt, higher volatilities in its domestic markets, surprised devaluations of the yuan in August in 2015, large depreciation last year, and due to ongoing weakness in the yuan, it has been losing its stature in the global payment system. The happening remains in contrary to the popular expectations that after inclusion of the yuan in International Monetary Fund’s (IMF) Special Drawing Rights (SDR) basket will increase its popularity in global payments. IMF officially included yuan into its SDR basket last year. Several of major global institutions such as the Bank of International Settlements (BIS) have warned against the non-performing assets in the banks of China, especially on how highly leveraged economy could call forth a crisis.
This market update is prepared by Cathay Bank for informational purposes only and does not constitute any form of legal, tax or investment advice, nor should it be considered an assurance or guarantee of future exchange rate movements or trends. This information is provided without regard to the specific objectives, financial situations or needs of any recipient. Cathay Bank does not make any representations or warranties about the accuracy, completeness or adequacy of this market update.