EXCHANGE RATE DEVELOPMENTS APRIL 2021
H i g h l i g h t s : Change Policy Interest Rates Current Last Updated Commodity Prices Average Price Change Previous Month (basis point) (in USD) Reserve Bank of NZ 0.25% 0.00 April 14, 2021 crude oil (US$/bbl) $64.49 $0.95 $63.54 Reserve Bank of Australia 0.10% 0.00 April 6, 2021 whole milk powder (US$/t) $4,097.00 $12.00 $4,085.00 US Federal Reserve 0.00 - 0.25% 0.00 April 28, 2021 European Central Bank 0.00% 0.00 April 22, 2020 Bank of England 0.10% 0.00 March 18, 2021 A. CURRENCY WATCH The Australian dollar (AUD) slightly appreciated to around The overall nominal effective value of the Samoan Tala USD$0.77 due to: depreciated by 0.0014 percent against the currency basket The upbeat domestic data releases, including a surge in in April 2021. This nominal depreciation reflected the building permits and retail sales, the accelerated consumer weakening of the Tala against the United States Dollar (by sentiment and inflation rate, the increased new home sales 0.01 percent), the Australian Dollar (by 0.02 percent) and and the decline in the unemployment rate with the economy adding a greater number of jobs to the market; Euro (by 0.58 percent) offsetting the Tala’s appreciation Investor confidence raised by the Australia-New Zealand travel against the New Zealand Dollar (by 0.04 percent). bubble which allowed people to use the government’s subsidized half priced airfares; Of the currencies in the Tala currency basket, the United Reserve Bank of Australia’s (RBA) decision to leave their policy States dollar (USD) gained modestly due to the following interest rate unchanged at 0.1%, as widely expected. developments, following its strong surge in March: A string of favourable domestic economic releases, such as The New Zealand dollar (NZD) weakened to around the positive housing figures, the better-than-expected job USD$0.71 against the USD mainly reflecting: numbers, the rising US consumer confidence, the robust first The stronger greenback dominating the lack of economic estimates of the annualized GDP for Q1, the upbeat releases out of the country to support the Kiwi, along with the manufacturing and non-manufacturing PMI, the higher core shrinking trade surplus and the declined business confidence; CPI, along with the accelerated retail sales and industrial The slow start with markets closing for Easter holiday and production figures; ANZAC holiday at the beginning of the month; The rising US Treasury yields, buoyed by the accelerated Reserve Bank of New Zealand (RBNZ) holding their Official momentum in the US economy following the improved Cash Rate (OCR) at 0.25%, and downplayed any anticipation manufacturing activities with businesses continuing to hire as of a premature monetary policy tightening. restrictions began to ease;
Safe haven demands amid the escalating geopolitical tension between Russia and the USA, with the former responding to Of the currencies not in Samoa’s currency basket, the US sanctions by ordering 10 US diplomats to leave the Japanese Yen (JPY) fell against the USD on: country. The release of softer domestic data during the month, such as The Federal Reserve Bank decision to continue to hold the decline on machinery orders, the negative inflation data, interest rates steady at 0.00-0.25%, and indicated that the the lower housing starts, the contracted industrial production first-rate hike will probably be in 2023. and consumer prices; Japan's economic recovery still lagging behind and hampered The Euro rebounded slightly against the USD, appreciating by Covid19 restrictions across its most populous prefectures, from US$1.19 to USD$1.20 on the back of: as well as the effects of an earthquake which disrupted most The favourable economic releases out of the region (such as industries in the country. the better-than-expected retail sales and consumer prices out of Germany and the Eurozone’s upwardly revised services and The Chinese Yuan (CNY) depreciated against the US currency manufacturing Purchasing Manager Index (PMI)); reflecting: Germany’s plans to immunize 20% of their population by the The stronger greenback and the lack of major statistics to beginning of May coupled with higher speculations that the uphold the Chinese Yuan against other major currencies; Eurozone’s economy will recover by the last quarter of 2021.
The People’s Bank of China (PBoC)’s decision to hold their 1- year Loan Prime Rate (LPR) at 3.85% and 5-years at 4.65% respectively.
B. TABLES AND CHARTS Table 1 shows the movements of the currencies in our currency basket together with the FJD, the Yuan and the Yen against the US dollar, compared to the previous month and April 2020. Table 1 USD* per other currencies (month average) Movement of other currencies against the USD over the previous month and the previous year (+) appreciation / (-) depreciation Apr-20 Mar-21 Apr-21 Mar-21 Apr-20 (%) (%)
NZD/USD 0.6000 0.7145 0.7141 -0.06 19.02 Source: Central Bank of Samoa AUD/USD 0.6291 0.7712 0.7713 0.01 22.60 USD/YEN 107.7190 108.5359 108.9039 -0.34 -1.10 USD/CNH 7.0867 6.5104 6.5152 -0.07 8.06 C. TALA AGAINST THE MAJOR CURRENCIES EUR/USD 1.0867 1.1916 1.1985 0.58 10.29 FJD/USD 0.4403 0.4897 0.4904 0.14 11.38 Samoan Tala Vs Major Currencies *with the exception of YEN and CNY which is YEN and CNY per USD Source: Central Bank of Samoa 0.6200 0.41 Table 2 shows the movement of the Tala against the 0.6000 0.39 currencies in the basket as well as against the FJD, the Yuan 0.5800 and the Yen, compared to the previous month and April 0.37 2020. 0.5600 (TALA/EUR. TALA/USD)
Table 2 (TALA/NZD, TALA/AUD) 0.35 Tala* per foreign currencies (month average) 0.5400 NOMINAL EXCHANGE NOMINALRATE VS TALA
Movement of the Tala over the previous EXCHANGE NOMINALRATE VS TALA month and the previous year 0.33 (+) appreciation / (-) depreciation 0.5200 Apr-20 Mar-21 Apr-21 Mar-21 Apr-20 (%) (%) 0.31 0.5000 USD/TALA 2.7817 2.5324 2.5326 -0.01 8.95 NZD/TALA 1.6689 1.8092 1.8084 0.04 -8.36 04-Jan-21 08-Jan-21 14-Jan-21 20-Jan-21 26-Jan-21 06-Apr-21 14-Apr-21 20-Apr-21 26-Apr-21 30-Apr-21 01-Feb-21 05-Feb-21 11-Feb-21 17-Feb-21 23-Feb-21 AUD/TALA 1.7493 1.9528 1.9532 -0.02 -11.66 01-Mar-21 05-Mar-21 11-Mar-21 17-Mar-21 23-Mar-21 29-Mar-21 EUR/TALA 3.0229 3.0173 3.0348 -0.58 -0.39 FJD/TALA 1.2248 1.2399 1.2418 -0.15 -1.39 TALA/Eur Tala/USD Tala/AUD Tala/NZD TALA/YEN 38.7226 42.8582 43.0000 0.33 11.05 Source: Central Bank of Samoa TALA/CNH 2.5475 2.5708 2.5725 0.07 0.98 Nominal Index 100.1458 99.9781 99.9767 -0.0014 -0.1689 *with the exception of YEN and CNY which is YEN and CNY per TALA Source: Central Bank of Samoa D. MARKET OUTLOOK FOR Q2 2021:
CHART 1: CBS EXCHANGE RATE TALA/USD Covid-19 related developments, revived geopolitical and 0.4040 trade tensions, domestic data releases, and subsequent 0.4020 economic policy measures by the monetary authorities are 0.4000 expected to drive the AUD, NZD and EURO trends in the next 0.3980 few months. These factors, along with the continued narrow 0.3960 interest differentials between the major countries, are 0.3940 anticipated to drive the AUD/USD and NZD/USD higher 0.3920 NOMINAL EXCHANGE NOMINALRATE around USD$0.79 and USD$0.72 respectively while the 0.3900
0.3880 EUR/USD is expected to trade around US$1.20 by end June
0.3860 quarter 2021. These indicate further weaknesses in the USD
0.3840 in the second quarter of 2021.
04-Jan-21 09-Jan-21 14-Jan-21 19-Jan-21 24-Jan-21 29-Jan-21 03-Feb-21 08-Feb-21 13-Feb-21 18-Feb-21 23-Feb-21 28-Feb-21 04-Apr-21 09-Apr-21 14-Apr-21 19-Apr-21 24-Apr-21 29-Apr-21 05-Mar-21 10-Mar-21 15-Mar-21 20-Mar-21 25-Mar-21 30-Mar-21 Source: Central Bank of Samoa FINANCIAL MARKETS DEPARTMENT 7 May 2021
ECONOMIC & FINANCIAL FORECASTS
Policy Interest rate forecasts Actual Jun 21 Sep 21 Dec 21 Mar 22 Jun 22 Sep 22 (7 May 2021) USA Fed Funds Rate 0.125 0.125 0.125 0.125 0.125 0.125 0.125 Australia RBA Cash Rate 0.10 0.10 0.10 0.10 0.10 0.10 0.10 New Zealand RBNZ Cash Rate 0.25 0.25 0.25 0.25 0.25 0.25 0.25 China PBOC Interest Rate 3.85 3.70 3.70 3.70 3.70 3.70 3.70 Euro-Area ECB Refinance Rate 0.00 0.00 0.00 0.00 0.00 0.00 0.00 United Kingdom BOE Base Rate 0.10 0.10 0.10 0.10 0.10 0.10 0.10 Exchange rate forecasts Actual Jun 21 Sep 21 Dec 21 Mar 22 Jun 22 Sep 22 (7 May 2021) AUD/USD 0.7773 0.79 0.80 0.82 0.85 0.85 0.84 NZD/USD 0.7225 0.72 0.73 0.74 0.76 0.76 0.75 EUR/USD 1.2055 1.20 1.21 1.23 1.25 1.26 1.27 USD/JPY 109.0650 109 110 111 112 111 111 GBP/USD 1.3886 1.40 1.40 1.41 1.41 1.42 1.42 USD/CNH 6.4651 6.47 6.45 6.43 6.46 6.35 -
US economic indicators and outlook Sep 20 Dec 20 Mar 21(f) Jun 21(f) Sep 21(f) Dec 21(f) Mar 22(f) GDP 33.4 4.3 6.4 9.2 6.8 5.1 3.4 %yr annual change -2.8 -2.4 0.4 12.8 6.7 6.9 6.1 Unemployment rate % 8.8 6.8 6.2 5.8 5.4 5.0 4.8 CPI % yr. 1.4 1.3 2.6 3.5 2.8 2.6 2.6
Australian economic indicators and outlook Sep 20 Dec 20 Mar 21(f) Jun 21(f) Sep 21(f) Dec 21(f) Mar 22(f) GDP % qtr. 3.4 3.1 1.6 0.8 1.0 1.1 - % year end -3.7 -1.1 0.7 9.2 6.6 4.5 - Unemployment rate % 7.1 6.8 5.9 5.4 5.2 5.0 - CPI % qtr 1.6 0.9 0.6 0.8 0.4 0.4 - Annual Change 0.7 0.9 1.1 3.8 2.7 2.2 -
New Zealand economic indicators and outlook Sep 20 Dec 20 Mar 21(f) Jun 21(f) Sep 21(f) Dec 21(f) Mar 22(f) GDP % qtr. 13.9 -1.0 -0.4 1.8 0.4 0.3 - Annual avg change -2.3 -2.9 -3.0 3.1 3.9 2.4 - Unemployment rate % 5.3 4.9 5.0 5.1 5.0 4.9 - CPI % qtr. 0.7 0.5 0.8 0.5 0.7 0.3 - Annual change 1.4 1.4 1.5 2.5 2.6 2.4 - Source: Bloomberg, Westpac Economics Update (07 May 2021), Trading Economics