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Daily
FX Update

Foreign central banks’ surprise with big cuts in benchmark interest rates

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Foreign central banks are cutting interest rates in anticipation of slowing global economic growth and trade. The Reserve Bank of New Zealand cut by 50 basis points, Thailand by 25 bps and India by 35 bps. Investors continue to watch the daily USDCNY fix by the People's Bank of China for clues about China’s next move in the US-China trade war and in a currency war that is heating up. The dollar is higher but it is the safe havens that are in great demand – bonds, gold and the Japanese yen.

“Business people need to understand the psychology of risk more than the mathematics of risk.”
Author Paul Gibbons, The Science of Successful Organizational Change
  • FX Rates
    August 7, 2019

    Rates are not real time. Rates are today's indicative mid-market rates as of time of publishing, which may vary. Please contact SVB for a current quote.


  • USD

    The dollar index is steady, but advances by the yen against the dollar were offset by weakness in the Australian and New Zealand dollars. Other currencies remained in relatively tight trading ranges. Early signs of a currency war are making traders nervous, as market chatter grows about potential (but not probable) intervention by the US Treasury to weaken the dollar.

    GBP

    The pound remains soft, but within a recent 1.21-1.22 trading range. Investors must wait until September when parliament returns from vacation for a no-confidence vote in PM Boris Johnson. He is sticking to his no-deal Brexit unless the EU changes their stance, and they have no incentive to do so at this time.  

    EUR
    The euro erased early losses and now trades close to yesterday’s close. German industrial production fell by more than expected in June, fueling fears that Europe’s largest economy could be approaching its first recession in more than six years. German 10-year bund yields dropped further to -0.60%.
    CAD

    The loonie weakened further overnight. The USDCAD currently trades above C$1.33, the highest level since June. Canadian markets were on holiday on Monday, so traders are playing catch-up to some extent. Canadian bond yields dropped to 1.13%, the lowest level in nearly three years. Expectations are growing for a rate cut by the Bank of Canada in December.

    ASIA/PACIFIC

    The USDCNY is trading slightly higher overnight. The offshore USDCNH continues to trade much higher than USDCNY, indicating that traders have high expectations of a weaker RMB going forward.

    The Reserve Bank of New Zealand was expected to cut its benchmark interest rate, but not by 50 bps. The new rate is 1.00%. The New Zealand dollar plunged to five-year lows, as the RBNZ gave no indication they were finished easing. The Australian dollar fell in sympathy, as traders expect the Reserve Bank of Australia to continue easing its monetary policy as well.

    The Japanese yen continued to gain against the dollar overnight, as safe haven buying remains strong. Currently trading near ¥105.70, the previous low in March 2018 was 104.74.

Contact Us

For more analysis on FX markets or information regarding SVB's FX services:

Contact your respective SVB FX Advisor or the SVB FX Advisory Team at fxadvisors@svb.com.
See all of SVB's latest FX information and commentary at www.svb.com/foreign-exchange

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About the Author

Scott Petruska is Chief Currency Strategist and senior advisor for Silicon Valley Bank’s global financial services group, and is based in Boston, MA. He advises clients on currency and interest rate hedging strategies, and helps them with other aspects of global banking. He regularly writes blogs on topics covering the global financial markets, conducts client seminars and webinars, and speaks at regional financial conferences.

Petruska has more than 30 years experience in the currency and interest rate markets, and has lived and worked in Boston, Chicago, New York City, Singapore and Tokyo. Prior to joining SVB in 2009, he worked at several large international financial institutions, including National Westminster Bank, Irving Trust, Bank of New York, State Street Bank and Commerce Bank. He has been an institutional trader, product developer, analyst, salesperson and advisor.

Petruska has been awarded several professional designations, including the CFA (Chartered Financial Analyst), FRM (Financial Risk Manager) and CMT (Certified Market Technician). He earned his undergraduate degree in Finance & Banking from the University of Wisconsin.

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