PNC Currency Review, January 2022 - Prior Quarter October 2021 - December 2021
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PNC Currency Review, January 2022 Prior Quarter October 2021 – December 2021
Summary
DXY Major Currencies Dollar Index
The dollar appreciated 1.5% on net in the fourth quarter of 2021.
2 year history : 1 year forecast
104
102
DXY US Dollar Index
100
98 +1.5%
96
94
92
90
88
Jan-20 Apr-20 Jul-20 Oct-20 Jan-21 Apr-21 Jul-21 Oct-21 Jan-22 Apr-22 Jul-22 Oct-22
Historical Previous Quarter 2-Year Moving Average Bloomberg Consensus Forecast PNC Forecast
3 month history Previous Quarter Recap
97
The DXY dollar index appreciated 2% in October and November.
The Fed reduced (“tapered”) purchases of government-backed
96
securities as expected in November, then further accelerated the
DXY US Dollar Index
taper in December as inflation stayed high.
The DXY edged lower in December (a typical ‘buy the rumor, sell
95 the fact’ move by the foreign exchange market) but still rose 1.5%
on net for the quarter.
94 Currency Outlook
PNC forecasts for continued but slower appreciation of the dollar
over the forecast horizon; the consensus forecast expects broadly
93 similar trends.
Oct-21 Nov-21 Dec-21
If the pandemic recedes as a global health concern in 2022, the
Previous Quarter dollar will likely be weaker than forecast.
Source: BloombergCurrency Update
Euro
The euro depreciated 2.0% on net in the fourth quarter of 2021.
1.25
2 year history : 1 year forecast
US dollars per euro
1.20
-2.0%
1.15
1.10
1.05
Jan-20 Apr-20 Jul-20 Oct-20 Jan-21 Apr-21 Jul-21 Oct-21 Jan-22 Apr-22 Jul-22 Oct-22
Historical Previous Quarter 2-Year Moving Average Bloomberg Consensus Forecast PNC Forecast
1.17
3 month history Previous Quarter Recap
The euro depreciated a net 2.0% in the fourth quarter of 2021. The
Fed began tapering its QE program in the quarter and warned they
could raise rates earlier than expected if inflation stayed high,
US dollars per euro
1.15
supporting a stronger dollar. The ECB is tapering its pandemic-era
QE programs, but their pre-pandemic programs will continue
considerably longer.
1.13 The prospect of higher short-term U.S. interest rates this year, in
contrast to continued negative euro rates, is weighing on the euro.
Currency Outlook
1.11 PNC forecasts for the euro to continue to depreciate over the
Oct-21 Nov-21 Dec-21 forecast horizon, while the consensus sees a modest recovery.
Previous Quarter If there is another major global shock, either from the pandemic or
an unrelated cause, the euro could be weaker than forecasted.
Source: BloombergCurrency Update
Great British Pound
Pound sterling edged down 0.1% in the trailing quarter as the costs of Brexit became more tangible.
2 year history : 1 year forecast
1.45
US dollars per British pound
1.40 -0.1%
1.35
1.30
1.25
1.20
1.15
1.10
Jan-20 Apr-20 Jul-20 Oct-20 Jan-21 Apr-21 Jul-21 Oct-21 Jan-22 Apr-22 Jul-22 Oct-22
Historical Previous Quarter 2-Year Moving Average Bloomberg Consensus Forecast PNC Forecast
3 month history Previous Quarter Recap
1.39
Pound sterling edged down 0.1% in the fourth quarter as U.K.-
E.U. tensions over trade across the Irish border resurfaced,
US dollars per British pound
1.37 shortages of immigrant labor caused gasoline shortages, and
natural gas prices spiked ahead of the winter heating season.
The Fed signaled in the fourth quarter that they could raise rates
1.35 faster than expected if U.S. inflation persists at high levels in
2022, contributing to a stronger dollar and weaker pound sterling.
1.33 Currency Outlook
PNC forecasts for the pound to continue to depreciate as the Fed
1.31
begins to normalize U.S. monetary policy; the consensus forecast
Oct-21 Nov-21 Dec-21 anticipates little net change.
Previous Quarter If there is another major global shock, either from the pandemic,
U.K.-E.U. economic frictions, a British energy crisis, or other
causes, pound sterling would likely be weaker than forecasted.
Source: BloombergCurrency Update
Canadian Dollar
The Canadian dollar was flat on net in the fourth quarter of 2021.
2 year history : 1 year forecast
1.50
Canadian dollars per US dollar
1.45
1.40
1.35
+0.1%
1.30
1.25
1.20
Jan-20 Apr-20 Jul-20 Oct-20 Jan-21 Apr-21 Jul-21 Oct-21 Jan-22 Apr-22 Jul-22 Oct-22
Historical Previous Quarter 2-Year Moving Average Bloomberg Consensus Forecast PNC Forecast
3 month history Previous Quarter Recap
1.30
The Canadian dollar depreciated to a one-year low in mid-
December amid the discovery of the Omicron variant, a hawkish
Canadian dollars per US dollar
1.28
turn by the Fed and a dimmer oil demand outlook; the Canadian
dollar then recovered some ground at the end of December as
risk appetite improved.
1.26 The FOMC announced in December that it will accelerate the
pace of reduction of asset purchases in January; this is bullish for
the U.S. dollar.
1.24
Currency Outlook
PNC expects the Canadian dollar to depreciate modestly over the
1.22 forecast horizon as the Fed tapers and oil demand cools; the
Oct-21 Nov-21 Dec-21 consensus forecast anticipates some appreciation.
Previous Quarter If the Bank of Canada increases its policy rate faster than
financial markets anticipate, the Canadian dollar is likely to be
stronger than forecasted.
Source: BloombergCurrency Update
Mexican Peso
The peso fell a net 0.4% in the fourth quarter and touched its year-to-date low during the quarter.
2 year history : 1 year forecast
26
Mexican pesos per US dollar
24
22 -0.4%
20
18
Jan-20 Apr-20 Jul-20 Oct-20 Jan-21 Apr-21 Jul-21 Oct-21 Jan-22 Apr-22 Jul-22 Oct-22
Historical Previous Quarter 2-Year Moving Average Bloomberg Consensus Forecast PNC Forecast
3 month history Previous Quarter Recap
21.8
The peso plunged to a year-to-date low in November when
Mexico’s President surprised markets by appointing a relatively
Mexican pesos per US dollar
unknown loyalist with thin monetary policy credentials to lead the
21.3 Bank of Mexico.
The peso largely recovered through quarter-end, supported by a
larger-than-expected 0.5 percentage point rate hike by the Bank
20.8
of Mexico in December.
20.3
Currency Outlook
PNC forecasts for the peso to depreciate over the next few
quarters; the consensus forecast is for somewhat less
19.8 depreciation.
Oct-21 Nov-21 Dec-21
PNC forecasts for the Federal Reserve to begin raising interest
Previous Quarter rates in the second half of 2022; this, as well as Mexico’s
domestic economic challenges, are downside risks to the peso.
Source: BloombergCurrency Update
Japanese Yen
The yen plunged 3.6% in the fourth quarter of 2021 to the weakest since 2017.
118 2 year history : 1 year forecast
Japanese yen per US dollar
116
114
112 -3.6%
110
108
106
104
102
Jan-20 Apr-20 Jul-20 Oct-20 Jan-21 Apr-21 Jul-21 Oct-21 Jan-22 Apr-22 Jul-22 Oct-22
Historical Previous Quarter 2-Year Moving Average Bloomberg Consensus Forecast PNC Forecast
3 month history Previous Quarter Recap
116
The yen dropped 3.6% in the fourth quarter of 2021 to the
115 weakest since 2017. It plunged in the first half of October as the
Japanese yen per US dollar
Fed signaled that they were about to begin tapering their
114
quantitative easing program, which they did in November.
Inflation in Japan was still near zero in November, making the
113 Bank of Japan unlikely to taper its quantitative easing program in
2022 or 2023. The divergence between U.S. and Japanese
112 monetary policy fueled the yen’s depreciation during the quarter.
111
Currency Outlook
PNC and the consensus forecast both expect the yen to
110 depreciate modestly in coming quarters.
Oct-21 Nov-21 Dec-21
If the U.S. recovery proceeds faster than forecast or U.S. inflation
Previous Quarter stays high longer than forecast, U.S. interest rates will likely
surprise to the upside and the yen be weaker than forecasted.
Source: BloombergCurrency Update
Chinese Renminbi
The renminbi appreciated 1.2% in the fourth quarter of 2021 to the strongest since 2018.
2 year history : 1 year forecast
7.25
Chinese renminbi per US dollar
7.00
6.75
+1.2%
6.50
6.25
Jan-20 Apr-20 Jul-20 Oct-20 Jan-21 Apr-21 Jul-21 Oct-21 Jan-22 Apr-22 Jul-22 Oct-22
Historical Previous Quarter 2-Year Moving Average Bloomberg Consensus Forecast PNC Forecast
3 month history Previous Quarter Recap
6.46
The renminbi appreciated 1.2% in the fourth quarter. China’s
economy faced several negative shocks in the quarter:
Chinese renminbi per US dollar
Lockdowns to fight the Delta and Omicron waves; regulations
6.43 that hurt the profitability of Chinese tech and tutoring companies;
a housing downturn; and electrical power rationing.
China’s central bank cut the benchmark lending rate 0.05% in
6.40
December, but limited exchange rate fluctuations during the
quarter to prevent renminbi depreciation from further worsening
sentiment toward Chinese capital markets.
6.37
Currency Outlook
6.34 PNC forecasts for the renminbi to depreciate over the forecast
Oct-21 Nov-21 Dec-21 horizon; the consensus anticipates little net change.
Previous Quarter The global economic recovery is an upside risk to the renminbi,
while the tightening of U.S. monetary policy and potential trade or
geopolitical tensions are downside risks.
Source: BloombergCurrency Update
Australian Dollar
The Australian dollar was little changed on net in the fourth quarter of 2021.
2 year history : 1 year forecast
0.80
US dollars per Australian dollar
+0.1%
0.75
0.70
0.65
0.60
0.55
Jan-20 Apr-20 Jul-20 Oct-20 Jan-21 Apr-21 Jul-21 Oct-21 Jan-22 Apr-22 Jul-22 Oct-22
Historical Previous Quarter 2-Year Moving Average Bloomberg Consensus Forecast PNC Forecast
3 month history Previous Quarter Recap
The Australian dollar depreciated to a seventeen-month low in
early December amid Omicron fears, a hawkish move by the Fed,
US dollars per Australian dollar
0.75
and a cloudier global economic outlook. The Australian dollar then
recovered some ground after China’s central bank loosened
monetary policy.
0.73
China is a large importer of Australian commodities and an
expanding Chinese economy is positive for the Australian dollar.
0.71 Currency Outlook
PNC anticipates the Australian dollar to stay relatively unchanged
over the next few quarters, while the consensus forecast expects
0.69 some appreciation of the currency.
Oct-21 Nov-21 Dec-21
If the Fed raises interest rates faster than markets anticipate, or
Previous Quarter
Australian-Sino relations worsen, the Australian dollar is likely to
be weaker than forecasted.
Source: BloombergCurrency Update
New Zealand Dollar
The New Zealand dollar depreciated 1.8% on net in the fourth quarter of 2021.
2 year history : 1 year forecast
0.75
US dollars per New Zealand dollar
-1.8%
0.70
0.65
0.60
0.55
Jan-20 Apr-20 Jul-20 Oct-20 Jan-21 Apr-21 Jul-21 Oct-21 Jan-22 Apr-22 Jul-22 Oct-22
Historical Previous Quarter 2-Year Moving Average Bloomberg Consensus Forecast PNC Forecast
3 month history Previous Quarter Recap
0.73
The New Zealand dollar depreciated to a thirteen-month low in
US dollars per New Zealand dollar
0.72 December amid a hawkish move by the Fed and Omicron
concerns.
0.71 Slowing Chinese economic activity also weighed on the New
Zealand dollar in the prior quarter; China is New Zealand’s
0.70 largest trading partner.
0.69
Currency Outlook
0.68 PNC anticipates for the New Zealand dollar to remain relatively
unchanged over the next few quarters, while the consensus
0.67 forecast anticipates some appreciation.
Oct-21 Nov-21 Dec-21
If China’s economic growth slows further, or the Fed raises
Previous Quarter interest rates faster than markets anticipate, the New Zealand
dollar is likely to be weaker than forecasted.
Source: BloombergCurrency Update
Indian Rupee
The Indian rupee depreciated 0.3% on net in the fourth quarter of 2021.
2 year history : 1 year forecast
78
Indian Rupees per US Dollar
-0.3%
76
74
72
70
68
Jan-20 Apr-20 Jul-20 Oct-20 Jan-21 Apr-21 Jul-21 Oct-21 Jan-22 Apr-22 Jul-22 Oct-22
Historical Previous Quarter 2-Year Moving Average Bloomberg Consensus Forecast PNC Forecast
3 month history Previous Quarter Recap
76.5
The rupee depreciated in December to the lowest level since
April 2020 amid Omicron fears, a worsening trade balance, and
Indian Rupees per US Dollar
76.0
an accommodative stance by the Reserve Bank of India (RBI).
75.5 The RBI held the reverse repurchase rate steady at 4.0% when
policymakers met on December 7.
75.0
Slowing economic activity in China, India’s largest trading
74.5
partner, further contributed to a weaker rupee.
74.0
Currency Outlook
PNC and the consensus forecast both anticipate for the Indian
73.5 rupee to hold mostly steady over the next few quarters.
Oct-21 Nov-21 Dec-21
If Chinese economic data continue to disappoint, or the Fed raises
Previous Quarter interest rates faster than markets anticipate, the Indian rupee is
likely to be weaker than forecasted.
Source: BloombergSwap Dealer Activities Standard Disclaimer The information contained herein (“Information”) was produced by an employee of PNC Bank, National Association’s (“PNC Bank”) foreign exchange and derivative products group. Such Information is not a “research report” nor is it intended to constitute a “research report” (as defined by applicable regulations). The Information is of general market, economic, and political conditions or statistical summaries of financial data and is not an analysis of the price or market for any product or transaction. This document and the Information it contains is intended for informational purposes only, and should not be construed as legal, accounting, tax, trading or other professional advice. You should consult with your own independent legal, accounting, tax and other professional advisors before taking any action based on this Information. Under no circumstances should this document or any Information contained herein be considered a recommendation or solicitation to buy or sell any products or services or a commitment to enter into any transaction. Eligibility for particular products or services is conditioned upon PNC Bank’s subsequent formal agreement, which will be subject to internal approvals and binding transaction documents. The Information contained herein on exchange and interest rates, commodity prices and market indices are gathered from sources PNC Bank believes to be reliable and accurate at the time of publication. Therefore, PNC Bank makes no representations or warranties regarding the Information’s accuracy, timeliness, or completeness. Further, all performance, returns, prices, or rates are for illustrative purposes only, are subject to firm quotes, may not be achievable or indicative of future performance, actual results will vary, and may be adversely affected by exchange rates, interest rates, commodity prices or other factors. Markets do and will change. Any Information, values, estimates, or opinions expressed or implied herein are subject to change without notice. Under no circumstances is PNC Bank liable for any lost profits, lost opportunities, or any indirect, consequential, incidental, special, punitive, or exemplary damages arising out of any use, reliance, or any opinion, estimate or Information contained herein or any omission therefrom. PNC Bank, its predecessors, and affiliated companies may serve, either currently or within the previous three years, as underwriter, placement agent, market maker, manager, initial purchaser, broker, or deal as principal in any security, derivative or other instruments mentioned in this document. Any such relationship may differ materially from transactions contemplated herein. In addition, PNC Bank, its affiliated companies, shareholders, directors, officers, or employees may at any time acquire, hold or dispose of positions similar or contrary to the positions contemplated herein (including hedging and trading positions) which may impact the performance of a product described in this document. Early termination of a foreign exchange or derivative transaction may require payment of a termination amount to or from PNC Bank depending on market rates or prices at the time of termination. The Information contained herein is confidential and may not be disclosed, duplicated, copied, disseminated or distributed by any means to any other person or entity without PNC Bank’s prior written consent. PNC is a registered service mark of The PNC Financial Services Group, Inc. (“PNC”). Foreign exchange and derivative products are obligations of PNC Bank, Member FDIC and a wholly owned subsidiary of PNC. Foreign exchange and derivative products are not bank deposits and are not FDIC insured, nor are they insured or guaranteed by PNC Bank or any of its subsidiaries or affiliates. ©2022 The PNC Financial Services Group, Inc. All rights reserved. Revision 01.02.2020
Market Update Disclosure The information contained herein (“Information”) was produced by an employee of PNC Bank, National Association’s (“PNC Bank”) foreign exchange and derivative products group. Such Information is not a “research report” nor is it intended to constitute a “research report” (as defined by applicable regulations). The Information is of general market, economic, and political conditions or statistical summaries of financial data and is not an analysis of the price or market for any product or transaction. This document and the Information it contains is intended for informational purposes only, and should not be construed as legal, accounting, tax, trading or other professional advice. You should consult with your own independent advisors before taking any action based on the Information. Under no circumstances should the Information be considered trading advice or a recommendation or solicitation to buy or sell any products or services or a commitment to enter into any transaction. The Information is gathered from sources PNC Bank believes to be reliable and accurate at the time of publication and are subject to change without notice. PNC Bank makes no representations or warranties regarding the Information’s accuracy, timeliness, or completeness. All performance, returns, prices or rates are for illustrative purposes only. Markets do and will change. Actual results will vary, and may be adversely affected by exchange rates, interest rates, commodity prices or other factors. PNC is a registered service mark of The PNC Financial Services Group, Inc. (“PNC”). Foreign exchange and derivative products are obligations of PNC Bank, Member FDIC and a wholly owned subsidiary of PNC. Foreign exchange and derivative products are not bank deposits and are not FDIC insured, nor are they insured or guaranteed by PNC Bank or any of its subsidiaries or affiliates. ©2022 The PNC Financial Services Group, Inc. All rights reserved. Revision 01.02.2020
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