Foreign Exchange Market Update
May 2, 2016
Indicative Interbank spot sell rates only as of 9:00 AM PST.
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United States (US) The US final PMI manufacturing PMI was unchanged from the earlier flash reading at 50.8.The index was significantly weaker than the first-quarter average of 2015 as the industrial sector struggled to gain any traction. There was a further small increase in the orders component, but at the lowest reading since December 2015 with export orders at the weakest level for 18 months, which had a wider impact in dampening demand. The ISM manufacturing index was slightly weaker than expected and also at 50.8 for April from 51.8 previously. Construction rose modestly in March, with gains in residential and nonresidential construction. Residential Construction rose by 1.6%, reflecting the recent gains in housing starts. Homebuilding has been on a slowly improving trend and is now 7.8% above its year ago level. Nonresidential Construction rose by 0.7%. Nonresidential construction year-over-year growth has been improving and is now 9.3% above its year ago level.
Australia’s dollar traded at 76.55 U.S. cents at 11:22 AM PST and New Zealand dollar traded at 70.12 U.S. cents. Australia’s Ai Group’s performance of manufacturing index (PMI) came in at 53.4, down on the 12-year high of 58.1 struck in the prior month. Although weaker than the figure reported in March, at 53.4, the reading still indicates a solid acceleration in activity levels during the month, continuing the trend seen since July last year. And the Melbourne Institute inflation gauge is at an annual increase at just 1.5%. It was the weakest annual increase since June last year, and down from 1.7% in March. And Australia's Business conditions eased in April to +9 from a reading of +12 in the previous month. The same is true for business confidence which came in at +5 slightly lower compared to +6 in March. Despite retreating from last month’s peaks, Australia's business conditions and confidence remain around elevated levels and continue to suggest that the business environment is positive at present. Australia RBA Cash rate Target decision will be released later today 5/2/2016.
Euro traded at 1.1520 against USD at 11:22 am PST. Italy's manufacturing activity expanded at the fastest pace in four months in April, as output, new orders and exports all rose at faster rates. The April Eurozone PMI manufacturing index improved slightly to 51.7 from the flash reading of 51.5 and recorded a marginal improvement from the March reading. As far as individual countries are concerned, there was a four-month high for Italy and most other economies recorded at least a limited monthly improvement. Italy’s Markit/ADACI Italy Manufacturing Purchasing Managers' Index rose to 53.9 in April from 53.5 in April. The notable exception was France where the manufacturing sector weakened to the lowest level for 12 month as the final reading weakened even further from the flash reading and exports fell at the fastest pace for three years data dropped to 48.0 from the prior 48.3. German manufacturing PMI fell to a seasonally adjusted 51.8, from 51.9 in the preceding month.
Japanese Yen traded at 106.49 per USD at 11:23 am PST. Japanese manufacturing activity contracted in April at the fastest pace in more than three years and output fell the most in two years, a final survey showed on Monday, after earthquakes halted production in the southern manufacturing hub of Kumamoto. The Markit/Nikkei Japan Manufacturing Purchasing Managers Index (PMI) fell to a seasonally adjusted 48.2 in April, which was above the preliminary reading of 48.0 but still below a final 49.1 in March.
Canadian dollar traded at 1.2537 per USD at 11:23 am PST. The RBC Canadian manufacturing PMI index remained in growth territory for April with a reading of 52.2 from a revised 51.5 previously and this was the strongest reading since December 2014. The data will maintain near-term confidence in manufacturing, although there was some evidence that the stronger Canadian dollar is starting to have some impact in curbing export demand. And the national Bloomberg Nanos Canadian Confidence Index advanced last week to 56.9, the highest since November, as expectations improved for the economy, housing, personal finances and job security.
Onshore Chinese yuan traded at 6.4720 per USD at 11:23 am PST and offshore Chinese yuan traded at 6.4808 per USD. China is moving to entice foreign investment into the country even as pressure on the yuan eases. Policy makers plan to allow banks to supply more dollars by lowering the floor for foreign-exchange settlement positions by a combined $100 billion, and make it easier for companies to convert cash from abroad into yuan, the State Administration of Foreign Exchange said on its website on Friday. The foreign-exchange regulator also said that it will allow cash settlement for currency forwards, in addition to physical delivery. The move will help companies to increase their hedging capacity while deepening the foreign-exchange market. In a separate statement, the People’s Bank of China said it will expand a pilot program of cross-border financing management to be available nationwide, allowing companies and financial institutions to sell foreign-currency debt without pre-approval from regulators.
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.