-9,8 turkish new lira helaba research fx briefly -2,2 ... · sources: bloomberg, helaba research...

Helaba Research

FX BRIEFLY

HEL ABA RESEARCH · 14 AUG UST 2 02 0 · © HEL ABA 1

14 August 2020

This publication was very carefully researched and prepared. However, it contains analyses and forecasts regarding current and future market conditions that are for informational purposes only. The data is based on sources that we consider reliable, though we cannot assume any responsibility for the sources being accurate, complete, and up-to-date. All statements in this publication are for informational purposes. They must not be taken as an offer or recommendation for investment decisions.

AUTHOR Christian Apelt, CFA

phone: +49 69/91 32-47 26 [email protected]

EDITOR

Dr. Stefan Mitropoulos

PUBLISHER: Dr. Gertrud R. Traud

Chief Economist/ Head of Research

Helaba

Landesbank Hessen-Thüringen

MAIN TOWER Neue Mainzer Str. 52-58 60311 Frankfurt am Main

phone: +49 69/91 32-20 24 fax: +49 69/91 32-22 44

In this edition you will find brief analyses of the US dollar, Swiss franc, British pound, Japanese yen, Norwegian krone, and Swedish krona, as well as the Australian dollar, the Canadian dollar, and the Chinese yuan.

The US dollar depreciated clearly, or rather, the euro appreciated noticeably. Only the Scandinavian currencies proved even stronger than the euro. Among the emerging markets, the Central European countries were convincing, while the Turkish lira as well as the Russian ruble and the South African rand lost quite a bit of ground.

Helaba currency forecasts

Performance on a month-over-month basis

% vs. euro compared to the previous month (from 07/15/20 to 08/13/20)

■ Core currencies ■ Rest of G10 ■ Currencies of emerging countries Sources: Bloomberg, Helaba Research

-3,4

-3,4

0,3

0,3

-1,3

-1,5

-3,8

0,8

0,8

2,0

1,8

2,4

-5,9

-9,8

-2,2

-2,8

-2,9

-8,0

-3,4

-2,7

US dollar

Japanese yen

British pound

Swiss franc

Canadian dollar

Australian dollar

New Zealand dollar

Swedish krona

Norwegian krone

Czech koruna

Polish zloty

Hungarian forint

Russian ruble

Turkish new lira

South Korean won

Chinese yuan

Indian rupee

South African rand

Brazilian real

Mexican peso

F X BRI EF L Y AUG UST


US dollar, Swiss franc and British pound

Lower US yield advantage weighing on the dollar USD

% points USD Trend: slight depreciation

The US dollar came under increasing pressure, as the euro-dollar exchange rate rose up to 1.19. The euro benefited from the agreement on the EU recovery fund and positive economic surprises. While the economic crash was less dramatic in the USA, the high number of new Covid-19 infections is dampening the recovery. In addition, the aggressive US monetary policy is weighing on the dollar: The US yield advantage is low, the Fed balance sheet is rising, and money supply growth is rapid. Regardless of a possible short-term setback, the euro-dollar rate should rise to 1.20.

Sources: Macrobond, Helaba Research

Euro-strength likely also against the franc CHF

USD, CHF Trend: slight depreciation

The Swiss franc weakened slightly. The euro-franc exchange rate has levelled off between 1.07 and 1.08. The political agreement in Brussels helped the euro. The general risk appetite increased and the franc was little in demand as a safe haven. Still, the Swiss central bank probably continued to intervene in the currency market. The Swiss economy is gaining momentum again. But, the general strength of the euro should show itself going forward in part also against the franc. After a sideways movement, the euro-franc exchange rate should climb to 1.10 by the end of 2020.


British yield advantage growing again GBP

% points GBP Trend: appreciation

The British pound proved to be stable, and the euro-pound rate stands around 0.90. This even though the British economy suffered the most severe slump in the second quarter by international standards, with a decline of over 20% qoq. However, the recovery is already underway. The Bank of England took a wait-and-see position, and British yields rose. The negotiations over the future relationship with the EU remain a factor of uncertainty. An agreement is realistic, which would help the pound. Should the economy gain more momentum, the pound should appreciate by the end of 2020.




Japanese yen, Norwegian krone and Swedish krona

Rise in euro-yen rate overshoots short-term JPY

Index, inverted JPY Trend: sideways

After a brief slide, the dollar-yen exchange rate remains unchanged on balance, while the euro-yen rate rose significantly due to the increasing risk appetite. In spite of low Covid-19 infections, Japan's economy slumped strongly, but a recovery is emerging. The Bank of Japan kept quiet. The low Japanese yield disadvantage or even advantage over the US and the euro zone is supporting the yen. As a result, Japan's currency should appreciate against the dollar, and in the short term also against the Euro. Over the medium term, the euro-yen rate will trend sideways. . * calculated from VIX, High-Yield Spreads, Gold-Copper Ratio


Norwegian krone profits from optimistic environment NOK

Index NOK Trend: slight appreciation

The Norwegian krone appreciated marginally. The euro-krone exchange rate fell to 10.5. The slight tailwind came from a growing risk appetite and higher crude oil prices. The recession in Norway is probably less severe than in other countries. Core inflation rose noticeably. To be sure, the central bank will leave the key interest rate at 0.0 % for the time being. Compared to other central banks, the Norges Bank could raise its key rate quite early. The Norwegian yield advantage would rise already in the run-up to such a move. The euro-krone rate should therefore decline further.

* calculated from VIX, High-Yield Spreads, Gold-Copper Ratio Sources: Macrobond, Helaba Research

Stable yield advantage supports the Swedish krona SEK

% points SEK Trend: sideways

The Swedish krona appreciated slightly. The euro-krona rate is below 10.3. Sweden suffered a deep recession despite its less restrictive corona policy. Foreign trade in particular is suffering, while private consumption weakened less. Monetary policy makers will probably not lower the key rate any further, but rather expand bond purchases. The Swedish yield advantage over the euro proved stable, but it will hardly increase at all in the absence of the prospect of interest rate hikes. The euro-krona exchange rate should decline only marginally over the medium term. Sources: Macrobond, Helaba Research



Australian dollar, Canadian dollar and Chinese yuan

Low yield advantage of the “Aussie“ a burden AUD

% points AUD Trend: slight depreciation against the euro

Although the Australian dollar lost ground against the euro, it gained against the US dollar. Global economic optimism and higher commodity prices boosted the "Aussie". This even though restrictions due to the pandemic should weigh on growth in Australia. Monetary policy remained on an expansionary course. The country could also suffer from the crisis in US-Chinese relations. We expect a sideways movement against the US dollar. Against the euro, the "Aussie" is likely to depreciate slightly, also due to interest rate differences.


Crude oil price providing tailwind to the “Loonie” CAD

USD/barrel, inverted CAD Trend: slight depreciation against the euro

The Canadian dollar weakened against the euro, but appreciated against the US dollar. The "Loonie" received tailwind from higher crude oil prices. After the slump, the Canadian economy is now picking up speed. Since core inflation has also barely declined, the Bank of Canada will wait and see for the time being after its expansionary measures. The yield differentials against the US hold appreciation potential for Canada's currency, which should therefore appreciate somewhat. The interest rate differentials against the euro argue for a slightly weaker "Loonie“.


Dollar weakness evident also against the yuan CNY

USD, inverted CNY Trend: sideways

While the Chinese yuan lost ground against the euro, it appreciated against the US dollar. The dollar-yuan exchange rate is trading noticeably below 7.0. The intensifying dispute between the US and China thus did not weigh on it. By international standards, the Chinese economic recovery has progressed further. The yield differentials speak clearly in favour of the yuan. The lower dollar-yuan exchange rate reflects in part the higher euro-dollar rate. While the dollar-yuan rate should continue to decline somewhat, the euro-yuan rate will trend sideways.




Helaba Currency Forecasts

Sources: Bloomberg, Helaba Research

Performanceyear to date 1 month current* Q3/2020 Q4/2020 Q1/2021 Q2/2021

vs. Euro vs. Euro, %

US dollar -5,1 -3,4 1,18 1,15 1,20 1,20 1,20

Japanese yen -3,6 -3,4 126 120 125 125 125

British pound -6,4 0,3 0,90 0,90 0,85 0,85 0,85

Swiss franc 1,0 0,3 1,07 1,07 1,10 1,10 1,10

Canadian dollar -6,8 -1,3 1,56 1,55 1,60 1,58 1,58

Australian dollar -3,4 -1,5 1,65 1,67 1,69 1,69 1,69

Swedish krona 2,3 0,8 10,26 10,30 10,20 10,20 10,20

Norwegian krone -6,2 0,8 10,49 10,40 10,20 10,20 10,00

Chinese yuan -4,9 -2,8 8,22 7,94 8,16 8,16 8,16

vs. US-Dollar vs. USD, %

Japanese yen 1,6 0,0 107 104 104 104 104

Swiss franc 6,3 3,8 0,91 0,93 0,92 0,92 0,92

Canadian dollar -1,8 2,2 1,32 1,35 1,33 1,32 1,32

Swedish krona 7,8 4,4 8,69 8,96 8,50 8,50 8,50

Norwegian krone -1,1 4,4 8,88 9,04 8,50 8,50 8,33

Chinese yuan 0,3 0,6 6,95 6,90 6,80 6,80 6,801,57

US-Dollar vs. … vs. USD, %

British pound -1,4 3,8 1,31 1,28 1,41 1,41 1,41

Australian dollar 1,8 2,0 0,71 0,69 0,71 0,71 0,71*13.08.2020

Forecast horizon at end ...

-9,8 turkish new lira helaba research fx briefly -2,2 ... · sources: bloomberg, helaba research...

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