November Commentary

November was a flat month overall with Thanksgiving and a somewhat earlier than expected slowdown towards the end of the year, seeing the major pairs stuck in tight ranges all month. The early pressure on the USD was wiped out as the Federal Open Market Committee (FOMC) came out with no rate hike this month and only minor tweaks to the policy statement. The gradual rate increases are still on the agenda going forward and expectations remain for one in December. With a 50 year low in unemployment and an economy enjoying strong momentum, the USD held on to its position of strength over other G10 CCYs.

A slowdown in the Chinese economy is starting to feed through in the stats: Oil prices and lower US treasury yields helped prop up Asian currencies while central banks in South Korea, Philippines and Indonesia raised rates to consolidate their currency values after a tough month of October!

After USD/CNH dropped 12000 points in the opening two days of the month following optimistic comments from the US and China concerning a possible resolution of the trade conflict during the G20 summit end of November, USD/CNH mostly traded within a tight range, between 6.92 and 6.96 from the 13th of November all the way through to the end of the month. While economic data continued to point towards a slowdown in the Chinese economy (miss in GDP numbers at the start of the month, November manufacturing PMI down to 50), a slump in commodity prices (oil in particular) and in US treasury yields helped relieve some of the pressure on the Yuan, while market participants remained patient and waited for the G20 summit to pick a side on Chinese assets. This resulted in much quieter renminbi trading over the second half of November.

After the US Dollar’s rapid appreciation against EM currencies in October, a combination of lower treasury yields and rapidly falling oil prices (brent down by 25% over the course of November) helped push Asian NDF pairs back down in November. In particular, the USD/PHP 1m NDF dropped by 3.2% while the USD/INR 1m NDF was down by nearly 6%, taking the Rupee back to its August trading level. Central banks in the Philippines, Indonesia and South Korea also decided to hike interest rates by 25bps each in November, to further help consolidate their respective currencies after a difficult month of October.

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