Currency Pair

USD/CAD

1.36

1.36

1.37

1.38

1.35

EUR/CAD

1.47

1.46

1.48

1.50

1.51

GBP/CAD

1.72

1.70

1.71

1.84

1.72

EUR/USD

1.09

1.07

1.08

1.09

1.12

GBP/USD

1.27

1.25

1.25

1.26

1.27

USD/JPY

145

145

145

138

136

USD/CHF

0.88

0.89

0.88

0.88

0.86

USD/CNY

7.26

7.20

7.10

6.90

6.80

USD/INR

82.78

82.70

82

81.50

81

AUD/USD

0.65

0.64

0.64

0.65

0.67

NZD/USD

0.59

0.58

0.59

0.60

0.61

USD/MXN

16.92

16.75

17.10

17.30

17.60

Currency Views

After a remarkable performance in August, during which the US dollar made significant gains against major currencies, its momentum began to wane as the month drew to a close. The path ahead for the US dollar remains uncertain, with the market largely dismissing the possibility of a September interest rate hike due to the latest job report results. As developments unfold in September, the dollar might encounter less favorable conditions, driven by factors such as a decrease in job growth and a softening of economic indicators. Following the impressive August rally that propelled the dollar to its highest levels of the year against currencies like the Japanese yen, Chinese yuan, Australian,  New Zealand dollars, and Swedish krona, corrective pressures might start to undermine the dollar's strength.

August was a dismal month for the Canadian dollar, plummeting from 1.32 to 1.36 against the US Dollar. This decline was primarily driven by economic divergence with the US and lower commodity prices due to a decelerating Chinese economy. With the Bank of Canada's upcoming meeting on September 6, all expectations of a rate hike have been abandoned. The trajectory of the Canadian dollar hinges on global risk factors, the Bank of Canada's stance, and economic indicators. The Canadian dollar appears to be going through a soft patch with more weakness ahead. 

August saw the euro declined nearly 2% against the US dollar, primarily attributed to the economic disparities between the United States and Europe. The Eurozone's economy has been struggling with minimal growth, and as the European Central Bank convenes this month, it is anticipated that there could be downward adjustments to economic growth projections. The prospect of additional rate hikes in the Eurozone has become less certain, leading to expectations of a potential pause in rate increases. The euro is likely to maintain its weakened stance and could potentially undergo further devaluation due to the strengthening of the US dollar.

The pound weakened against the US dollar, despite performing better than other G10 currencies. The Bank of England is expected to pause sooner than expected to assess previous tightening, leading to potential underperformance. GBP will also be impacted by flat growth or mild recessionary conditions.

August was like a broken record for the JPY,  it stumbled again from 142 to 146 against the US dollar. The driving forces behind this depreciation included the economic disparity between the US and Japan, a sluggish Japanese consumer, and the Bank of Japan's inclination towards a weaker yen. There's a possibility of a shift in the JPY's trajectory this month, with potential changes in the BOJ's monetary policy or the implementation of new fiscal initiatives such as energy subsidies and consumer-oriented spending measures to bolster the Japanese consumer.

In August, the Chinese yuan fell by 1.6% against the US dollar due to concerns about China's real estate sector and disappointing economic numbers. The yuan is in a fragile state as the government seeks stability while cutting policy rates. With expectations of higher US policy rates persisting, additional depreciation of the Chinese yuan is expected.

In the month of August, the Indian rupee weakened against the US dollar, moving from 82.25 to 82.78. The Reserve Bank of India maintained its main policy rate at 6.50%, concurrently maintaining its "withdrawal of accommodation" stance, while also maintaining a hawkish outlook. Additionally, the RBI tightened liquidity conditions by increasing the Incremental Cash Reserve Ratio. If global market sentiment stabilizes,  the Indian rupee could see further appreciation.

Nothing went right for the Australian dollar for most of August. It fell by more than 5.5% against the US dollar. Multiple factors played a role in this downfall, including the robustness of the US economy, lackluster domestic economic indicators, and underwhelming performance of the Chinese economy. Looking ahead, the Australian dollar's recovery from its current lows hinges on several key factors, including a possible resurgence in the Chinese economy, an improvement in global risk sentiment, and a shift in US interest rate policy. 

In August, the New Zealand dollar depreciated  due to rising US yields driven by the expectation of a prolonged higher policy rate by the Federal Reserve and concerns about China's property sector impacting global growth outlook. The worsened global growth prospects, especially due to weaker growth in China, are likely to weigh on the New Zealand dollar's performance in the near term.

In August, the Mexican peso (MXN) weakened from 16.7 to 16.9 against the US dollar. The peso's movement continues to be primarily shaped by the monetary policies in both Mexico and the United States. It's expected that the peso will benefit from  attractive carry-trade returns and the ongoing trend of US investments into Mexico. However, a potential slowdown in the US  could limit the flow of US investments into Mexico. Domestically, investor focus may gradually shift towards the upcoming presidential election scheduled for June 2024.