Helaba Research FX BRIEFLY 10 January 2017 AUTHOR Christian Apelt, CFA phone: +49 69/91 32-47 26 research@helaba.de EDITOR Claudia Windt PUBLISHER: Dr. Gertrud R. Traud Chief Economist/ Head of Research While the US dollar made virtually no further gains against the euro, it moved higher against the Japanese yen and especially the British pound. The Swedish krona appreciated noticeably. Emerging market currencies showed a very mixed trend, with winners from Russia and Brazil, and losers from Mexico and Turkey. In this edition you will find brief analyses of the US dollar, Swiss franc, British pound, Japanese yen, Norwegian krone, and the Swedish krona, as well as the Australian dollar, the Canadian dollar, and the Chinese yuan. Helaba currency forecasts 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 Performance on a month-over-month basis % vs. euro compared to the previous month (from 12/09/16 to 01/09/17) -0,8-0,1 US dollar Japanese yen -3,5 British pound 0,1 Swiss franc -0,4 Canadian dollar -1,8-1,4 Australian dollar New Zealand dollar 1,4 Swedish krona -0,6 Norwegian krone 0,0 Czech koruna 1,6 Polish zloty 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. -6,5-4,7-2,7-0,4-0,5 0,8 2,2 3,8 Hungarian forint Russian ruble Turkish new lira South Korean won Chinese yuan Indian rupee South African rand 5,4 Brazilian real Mexican peso Core currencies Rest of G10 Currencies of emerging countries Sources: Bloomberg, Helaba Research HELABA RESEARCH 10 J ANUARY 2 017 HEL ABA 1
US dollar, Swiss franc and British pound US yield advantage ahead of a trend reversal? USD % points Trend: depreciation USD While the euro-dollar exchange rate fell briefly to a new 14- year low, on balance, it was unchanged around 1.05. After the US interest rate hike in December, additional moves are expected in 2017. However, the US yield advantage rose only temporarily. Because just limited growth impulses from Trump s policies are likely, the Fed will continue to raise its key rate only cautiously. Trump s basic protectionist stance also argues against a strong dollar. Likewise, because of the valuation, the euro-dollar exchange rate will presumably rise over the medium term. Hardly any SNB interventions in December Billion CHF CHF Trend: sideways CHF The Swiss franc trended sideways, and the euro-franc rate is trading around 1.07. The currency reserves of the Swiss central bank did not continue to rise in December; i.e., the SNB hardly intervened in the currency market. Fundamentally, however, the central bank is continuing its expansionary course. The Swiss yield disadvantage vis-à-vis German Bunds remained virtually unchanged. Economically the most recent data were disappointing, and inflation remained negative. The euro-franc exchange rate should return to the range of 1.08 to 1.10. Pound recovery against the euro is over GBP USD Trend: depreciation GBP The British pound depreciated in recent weeks. The europound exchange rate rose to 0.87. This even though British growth remained quite robust overall, even if some indicators are pointing to a somewhat weaker economy. By contrast, concerns about the manner of the British exit from the EU is weighing on the pound. Both growth and the currency should suffer from these discussions. In spite of the rising inflation, Britain s monetary policy remains very expansionary, and it could become even more so. The euro-pound rate should rise again in the direction of 0.90. HELABA RESEARCH 10 J ANUARY 2 017 HEL ABA 2
Japanese yen, Norwegian krone and Swedish krona Japan s current account surplus as long-term support JPY % of GDP, 3-M.-Ø, inverted Trend: appreciation JPY The Japanese yen gave ground against the US dollar as well as the euro. Japan s yield disadvantage expanded further on shorter maturities. However, the global rise in yields seems to be encountering limits, which helps the yen. The Japanese economy is improving slightly. Inflation remains low, which means that the central bank will retain its expansionary policy. Japan s high current account surplus should support the yen, much like the favourable valuation. The yen will recover slightly against the euro and more robustly against the US dollar. Norwegian krone not benefitting from oil price tailwind USD/barrel, inverted NOK Trend: medium-term appreciation NOK The Norwegian krone showed an inconsistent trend most recently; the euro-krone rate is trading around 9.0. Norway s currency is barely benefitting from the higher oil price. By contrast, Norway s yield advantage against the euro did not continue to rise. Norway s central bank did not hold out the prospect of any more rate cuts and warned against the overheated real estate market. It should therefore change its orientation in the opposite direction during 2017. Growth (mainland) proved solid, inflation is elevated. The eurokrone rate will presumably decline in 2017. Swedish yields at an advantage again SEK % points Trend: appreciation SEK The Swedish krona appreciated markedly against the euro. The euro-krona rate dropped to nearly 9.5. Sweden s central bank retained its negative interest rate, but it reduced its purchase program. In fact, two of the six members of the Riksbank voted to end the program altogether. This points to a trend reversal on monetary policy, especially since Sweden s economy is accelerating again. Even inflation is slowly moving up. Since the Swedish currency is strongly undervalued, as it is, the euro-krona rate should weaken noticeably in the course of 2017. HELABA RESEARCH 10 J ANUARY 2 017 HEL ABA 3
Australian dollar, Canadian dollar and Chinese yuan Aussie followed metals prices only downward Index USD Trend: slight depreciation against the euro AUD The Australian dollar lost noticeably against the US dollar and the euro. The most recent price decline for base metals weighed on the Aussie, while the exchange rate had ignored the earlier, robust increase. After the GDP decline in Q3, growth is stabilizing, though it tends to remain moderate. Inflation is quite low. The central bank remains in its wait-and-see stance, though it could become more expansionary should the currency appreciate. Thanks to commodity prices, the Aussie could gain a little against the US dollar, while it should depreciate slightly against the euro. Loonie with yield disadvantage against US dollar CAD % points Trend: depreciation against the euro CAD On balance the Canadian dollar was unchanged against the US dollar and the euro in spite of a temporary weakness. The higher oil prices hardly helped the Loonie. Canada s growth did not, after all, develop as robustly as was hoped. Inflation remained moderate. Canada s central bank will still wait longer. The interest rate difference could weigh on the Loonie, even if the oil price is supporting the currency. The Canadian dollar should decline slightly against the US dollar and more strongly against the euro. China s currency reserves shrinking again CNY Billionen USD Trend: depreciation against the euro CNY The Chinese yuan depreciated marginally against the US dollar and the euro. The dollar-yuan exchange rate stands above 6.90. China s currency reserves shrank again noticeably and are approaching the 3 trillion level. The capital flight thus seems to be continuing, and it has already prompted political countermeasures. In addition, Trump is stoking uncertainty with his potential policies. In particular for political reasons the yuan should stabilize against the US dollar for now. By contrast, China s currency will depreciate further against the euro. HELABA RESEARCH 10 J ANUARY 2 017 HEL ABA 4
Helaba Currency Forecasts vs. Euro (vs. Euro, %) Performance Forecast horizon at end... year to date 1 month current* Q1/2017 Q2/2017 Q3/2017 Q4/2017 US dollar -0,5-0,1 1,06 1,15 1,15 1,15 1,10 Japanese yen 0,2-0,8 123 115 115 121 115 British pound -1,8-3,5 0,87 0,90 0,90 0,90 0,85 Swiss franc -0,1 0,1 1,07 1,08 1,08 1,10 1,10 Canadian dollar 1,1-0,4 1,40 1,55 1,53 1,52 1,49 Australian dollar 1,5-1,4 1,44 1,53 1,49 1,47 1,45 Swedish krona 0,1 1,4 9,57 9,30 9,20 9,10 9,00 Norwegian krone 0,6-0,6 9,03 8,90 8,90 8,80 8,70 Chinese yuan 0,3-0,4 7,32 7,94 7,94 7,99 7,70 vs. US-Dollar (vs. USD, %) Japanese yen 0,8-0,6 116 100 100 105 105 Swiss franc 0,4 0,2 1,02 0,94 0,94 0,96 1,00 Canadian dollar 1,7-0,3 1,32 1,35 1,33 1,32 1,35 Swedish krona 0,7 1,6 9,05 8,09 8,00 7,91 8,18 Norwegian krone 1,2-0,4 8,54 7,74 7,74 7,65 7,91 Chinese yuan 0,1-0,4 6,94 6,90 6,90 6,95 7,00 1,57 US-Dollar vs. (vs. USD, %) British pound -1,4-3,3 1,22 1,28 1,28 1,28 1,29 Australian dollar 2,0-1,3 0,74 0,75 0,77 0,78 0,76 *09.01.2017 Sources: Bloomberg, Helaba Research HELABA RESEARCH 10 J ANUARY 2 017 HEL ABA 5