Investment Managers Securities Analysts

Bermuda & Cayman

Currency Markets

Source: Bloomberg
The US dollar appreciated against the Japanese yen amid rising interest rate differentials.

World Currency Markets

• On July 18 Sterling depreciated to $1.3070, a ten-month low against the US dollar after economic data showed inflation in the UK held at 2.4 percent in June, below expectations for an increase to 2.6 percent. The market, which had expected the Bank of England to raise rates in the bank’s August meeting, pared bets on that outcome following the release. Earlier in the week the pound had been under pressure as Brexit votes in parliament showed Prime Minister Theresa May’s majority on the issue had weakened.

• On August 14 the euro weakened to $1.1344, the lowest level against the US dollar in over a year. The key trigger for the euro depreciation related to uncertainty over Turkey and Italy. Volatility in Turkish markets raised concerns over the exposure of European banks to Turkey, while political uncertainty led Italian bond yields higher. Further, a cautious statement from the European Central Bank (ECB) showed concern for subdued inflation and weighed on the euro as the market pared back expectations for the ECB’s next interest rate hike to Third Quarter 2019.

• On August 15 the Australian dollar recovered from a two-year low against the US dollar as the ruling Liberal Party responded to public discontent and ousted centrist Malcolm Turnbull as prime minister and replaced him with Treasurer Scott Morrison. With regular snap elections and no prime minister that has served a full term in a decade, willingness to enact bold and potentially painful policies to modernize Australia’s commodity-dependent economy have been lacking. On the day the Australian dollar strengthened 0.30 percent against the US dollar and closed at US$0.7260.

• On August 23 Bhe Brazilian real weakened against all major currencies amid political chaos as a poll showed jailed former President Luiz Inacio da Silva held a double digit lead against far-right Congressman Jair Bolsonaro ahead of the presidential election in October. Lula is facing corruption charges and is expected to be barred from the race. The real had earlier been under pressure amid a US dollar rally and a broader selloff of Emerging Market currencies. On the day the real depreciated 1.75 percent against the US dollar.

• On September 28 the Japanese yen depreciated to ¥113.70 against the US dollar, the weakest level in 2018, amid a rally in Asian equity markets and large US dollar purchases for month-end at the Tokyo exchange. Higher US Treasury yields and trade tensions weighed on the yen throughout Third Quarter 2018.