The greenback retreats

This week, the euro-dollar parity moved into the green after a low of 1.1524 on 12 October. With a current exchange rate of 1.1640 this represents an increase of 116 points. Despite monetary tightening expectations in America, sentiment around the greenback has soured thanks to disappointing industrial statistics. In September, industrial production in the USA fell by 1.3% compared to the previous month while the market expected a slight increase of 0.2%.  Moreover, this same figure for August has been revised downwards to a contraction of 0.1% against an initial estimate of 0.4% growth. The decline of the US dollar is even more pronounced against the rouble and the Canadian dollar: the rouble strengthened as the parity fell below the threshold of 71 roubles to the dollar, a high since last summer. The Canadian dollar has also gained quite some ground, with an almost 6-month high against the greenback. These currencies are supported by the rise in oil prices. The barrel of oil continues to soar amid the global economic recovery. A barrel of Brent is worth $84.50 and a barrel of WTI $82.40. The Swiss franc is also advancing against the dollar and is trading at CHF 0.9238. Against the single currency, our national currency made an incursion below 1.07 last Thursday before stabilising again above this threshold. The SNB is suspected of fighting against the appreciation of the Swiss franc. The Swiss franc is still seen as a safe haven to protect against high inflation and sluggish growth.

The pound sterling continues to advance towards $1.38 following comments by central bank governor Andrew Bailey. He said that soaring energy prices would mean upward pressure on prices would linger and that policymakers should act if they saw any risks. The New Zealand dollar is also advancing on the anticipation of an upcoming monetary tightening with the release of the highest inflation figures of a decade. And in Singapore, their dollar is benefiting from the unexpected decision of its central bank to tighten its monetary policy. After having published solid growth of 6.5% in the third quarter, the monetary authority decided to increase the fluctuation margin of its national currency, which allowed it to appreciate. By proceeding in this way, the city-state, which is extremely dependent on imports, sought and obtained a more favourable exchange rate allowing it to better contain an increase in overall prices. The Australian dollar is also trending higher despite comments from the central bank expressing concern about the effect of monetary tightening on employment.

The situation in Japan is not as clear. Since mid-September, we have witnessed a weakening of the yen (today at its lowest since October 2018) despite its status as a safe haven. The weakness of the yen is explained by the rise in energy prices – the country is very dependent on imports – and by the difficulties of their Chinese neighbour. On the other hand, a lower yen favours exports from the land of the rising sun, which benefits the automotive sector, for example. This is automotive sector, which on a global scale suffers from great difficulties in the supply of electronic components.

The Turkish lira hit an all-time low against the dollar at 9.37 earlier this week. Recep Erdogan sacked three new central bank members in the middle of the night, which has not been very reassuring to investors. The Turkish national currency has lost a quarter of its value since the start of the year.

In China, speaking about macroeconomics, GDP came out lower than expected with growth of 4.9% in the third quarter against expectations of 5.2%. Growth for the first two quarters has also been revised downward. The resurgence of the virus and the lack of electricity continue to hamper the recovery of activity. Producer prices rose 10.7% year-on-year in September under the impact of higher commodity prices. This is the fastest increase since the data has been measured.

And lastly, in the United States, Jerome Powell is now in the eye of the hurricane after documents have shown that he carried out suspicious stock transactions on the eve of bear markets. These are precisely the same reasons which prompted two regional presidents to resign. In addition to the ethical questions facing the members of the Fed, the question of the succession of Jerome Powell has still not been decided and this latest news does not favour his reappointment, which further adds to the instability of the greenback.