Foreign Exchange Market Update
October 27, 2016
Indicative Interbank spot sell rates only as of 9:00 AM PST.
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United States (US) Durable Goods Orders fell by 0.1% in September, compared with market expectations for unchanged. Moreover, the prior month was revised higher from flat to 0.3%. Transportation Orders fell by 0.8% with civilian aircraft orders climbing by 12.5% while motor vehicle orders climbed by 1.2%. Ex-transportation orders rose by 0.2%. Electrical equipment, machinery increased while computers and electronic products, fabricated metal products declined. Core Durable Goods Orders, those excluding both civilian aircraft and defense, rose by 0.2% and are 0.2% below their year ago level. Nondefense capital goods shipments ex-aircraft, proxies for equipment and software investment, are modestly below their Q2 level, suggesting that capital spending will likely make a small negative contribution to Q3 GDP growth.
Australia’s dollar traded at 75.91 U.S. cents at 11:51 AM PST and New Zealand dollar traded at 71.23 U.S. cents. Iron ore, Australia’s largest goods export by dollar value, has also found some renewed vigor following an explosive move higher in the second quarter of 2016, hitting a fresh six-month high of $US63.07 on Wednesday, extending its gains this year to 45%. By value, iron ore, coking coal and thermal coal account for 15.5%, 6.5% and 4.5% of Australian exports by dollar value, accounting for a combined total of 26.5% of all exports, including services. As a result of the surge in these commodity prices, Australia’s terms of trade looks set to record a large and rare increase in the third quarter. On another note, New Zealand’s terms of trade weakened in September. The merchandise trade deficit widened to NZ$1.44 billion in September. A median estimate of economists predicted a $1.1 billion shortfall. Compared to the June quarter, the value of goods exports fell at a seasonally adjusted 4.8% to $12 billion. Meat and edible offal led the decline, falling 15%. Goods imports rose 2.2% to $13.1 billion.
Euro traded at 1.0904 against USD at 11:51 am PST. Italian consumer confidence dropped this month to the lowest since July 2015, in a setback for Prime Minister Matteo Renzi’s plans to spur economic growth. The household gauge in October dropped to 108 from a revised 108.6 the month before. The median estimate of 11 analysts in a Bloomberg survey called for 108.6. Manufacturing confidence gained to 103 from 102.1 in September.
British Pound exchange rate is 1.2178 against USD at 11:51 am PST. The UK’s first official growth figures since the Brexit vote have confounded the government’s warnings of an immediate recession if Britain voted to leave the EU. The economy was 0.5% larger between July and September than three months earlier. The Treasury had predicted it would shrink 0.1%. On another note, retail sales rose 4.1% on an annual basis in September, compared with an upwardly revised 6.6% increase in August and analysts' expectations for a 4.9% gain.
Onshore Chinese yuan traded at 6.7790 per USD at 11:51 am PST and offshore Chinese yuan traded at 6.7953 per USD. Companies have also been conducting more business in yuan, and Swift reported that the currency was used in 2.03% of global payments by value in September, up from 1.86% in August. The value of yuan global payments increased by more than 10% in September, much higher than than average growth of 0.93% for all currencies. On another note, Industrial sector profits last month rose 7.7% to 577.1 billion yuan, slowing markedly after surging 19.5% in August, NBS figures released on its website showed on Thursday.
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.