PNC Currency Review, November 2021 - Prior Quarter August 2021 - October 2021
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PNC Currency Review, November 2021 Prior Quarter August 2021 – October 2021
Summary
DXY Major Currencies Dollar Index
The dollar appreciated 2.1% on net in the August-to-October quarter of 2021.
2 year history : 1 year forecast
104
102
DXY US Dollar Index
100
98
96 +2.1%
94
92
90
88
Nov-19 Feb-20 May-20 Aug-20 Nov-20 Feb-21 May-21 Aug-21 Nov-21 Feb-22 May-22 Aug-22
Historical Previous Quarter 2-Year Moving Average Bloomberg Consensus Forecast PNC Forecast
3 month history Previous Quarter Recap
95
▪ The DXY dollar index appreciated 2.1% in the August-to-October
quarter as the Federal Reserve signaled a taper of its quantitative
easing program was near.
DXY US Dollar Index
94
▪ The DXY index pulled back in early September as the global Delta
wave worsened, then rose again through quarter-end as cases
93 peaked and began to fall.
92 Currency Outlook
▪ The DXY’s recent appreciation has already lifted it to PNC’s target
for its value at the end of 2022; the consensus forecast likewise
91 sees the dollar little changed over the forecast horizon.
Aug-21 Sep-21 Oct-21
▪ If foreign economies recover faster than expected, the dollar could
Previous Quarter be weaker than forecasted. On the other hand, another major
global shock could cause the dollar to appreciate even more.
Source: BloombergCurrency Update
Euro
The euro depreciated 2.6% on net in the August-to-October quarter of 2021.
1.25
2 year history : 1 year forecast
-2.6%
US dollars per euro
1.20
1.15
1.10
1.05
Nov-19 Feb-20 May-20 Aug-20 Nov-20 Feb-21 May-21 Aug-21 Nov-21 Feb-22 May-22 Aug-22
Historical Previous Quarter 2-Year Moving Average Bloomberg Consensus Forecast PNC Forecast
1.19 Previous Quarter Recap
3 month history
▪ The euro depreciated a net 2.6% in the August-to-October quarter.
1.18 ▪ The Fed signaled throughout the quarter that a taper of its
US dollars per euro
quantitative easing program was nearing, supporting a stronger
dollar; the ECB has begun tapering its pandemic-era QE programs
1.17 but the pre-pandemic programs will continue considerably longer.
▪ The prospect of higher short-term U.S. interest rates in a few years,
1.16
in contrast to continued negative euro rates, weighed on the euro.
Currency Outlook
1.15 ▪ Both PNC and the consensus forecasts see the euro little changed
Aug-21 Sep-21 Oct-21 over the forecast horizon but more likely a bit stronger than weaker.
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 depreciated 1.6% 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
1.35
-1.6%
1.30
1.25
1.20
1.15
1.10
Nov-19 Feb-20 May-20 Aug-20 Nov-20 Feb-21 May-21 Aug-21 Nov-21 Feb-22 May-22 Aug-22
Historical Previous Quarter 2-Year Moving Average Bloomberg Consensus Forecast PNC Forecast
3 month history Previous Quarter Recap
1.40
▪ Pound sterling depreciated in the August-to-October quarter as
UK-EU tensions over trade across the Irish border resurfaced,
US dollars per British pound
1.39
shortages of immigrant labor caused gasoline shortages, and
1.38
natural gas prices spiked ahead of the winter heating season.
▪ The Fed also signaled in the third quarter that a taper of its
1.37 quantitative easing program was getting nearer, further
contributing to a stronger dollar and weaker pound sterling.
1.36
Currency Outlook
1.35
▪ PNC forecasts for the pound to hold at its now-lower level as the
1.34
Fed begins to normalize U.S. monetary policy; the consensus
Aug-21 Sep-21 Oct-21 forecast anticipates modest pound appreciation.
Previous Quarter ▪ If there is another major global shock, either from the pandemic,
UK-EU 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 appreciated 0.7% on net in the August-to-October quarter of 2021.
2 year history : 1 year forecast
1.50
Canadian dollars per US dollar
1.45
1.40
1.35
1.30 +0.7%
1.25
1.20
Nov-19 Feb-20 May-20 Aug-20 Nov-20 Feb-21 May-21 Aug-21 Nov-21 Feb-22 May-22 Aug-22
Historical Previous Quarter 2-Year Moving Average Bloomberg Consensus Forecast PNC Forecast
3 month history Previous Quarter Recap
1.30
▪ The price of Western Canada Select crude oil, Canada’s top
Canadian dollars per US dollar
export, hit a seven-year high in October, which contributed to the
1.28
quarter’s slight appreciation of the Canadian dollar.
▪ The Bank of Canada ended its quantitative easing program and
pulled forward when they expect to start raising the policy rate at
1.26 their October 27 meeting. After its appreciation in the prior
quarter, the Canadian dollar is the best performing G10 currency
this year.
1.24
Currency Outlook
▪ PNC expects the Canadian dollar to depreciate modestly over the
1.22 forecast horizon as the Fed begins to taper its QE program; the
Aug-21 Sep-21 Oct-21 consensus forecast anticipates some appreciation.
Previous Quarter ▪ If the Bank of Canada increases its policy rate faster than
financial markets anticipate or the Fed delays its taper, the
Canadian dollar is likely to be stronger than forecasted.
Source: BloombergCurrency Update
Mexican Peso
The peso depreciated 3.5% in the August-to-October quarter of 2021.
2 year history : 1 year forecast
26
Mexican pesos per US dollar
24
22
20
-3.5%
18
Nov-19 Feb-20 May-20 Aug-20 Nov-20 Feb-21 May-21 Aug-21 Nov-21 Feb-22 May-22 Aug-22
Historical Previous Quarter 2-Year Moving Average Bloomberg Consensus Forecast PNC Forecast
3 month history Previous Quarter Recap
21.0
▪ The Mexican peso depreciated 3.5% in the August-to-October
quarter as the Federal Reserve pulled forward plans to taper their
Mexican pesos per US dollar
20.8
quantitative easing program and raise U.S. interest rates.
20.5 ▪ The Bank of Mexico made two 0.25 percentage point policy rate
hikes in the third quarter to limit the peso’s depreciation.
20.3
20.0
Currency Outlook
19.8 ▪ PNC forecasts for the peso to hold its new weaker level over the
next few quarters while the consensus forecast is for the peso to
19.5 be flat to slightly stronger.
Aug-21 Sep-21 Oct-21
▪ PNC forecasts for the Federal Reserve to begin tapering its
Previous Quarter quantitative easing program in late 2021; this, as well as Mexico’s
domestic economic challenges, are downside risks to the peso.
Source: BloombergCurrency Update
Japanese Yen
The yen was little changed on net in the August-to-October quarter of 2021.
116 2 year history : 1 year forecast
Japanese yen per US dollar
114
112
-3.9%
110
108
106
104
102
Nov-19 Feb-20 May-20 Aug-20 Nov-20 Feb-21 May-21 Aug-21 Nov-21 Feb-22 May-22 Aug-22
Historical Previous Quarter 2-Year Moving Average Bloomberg Consensus Forecast PNC Forecast
3 month history Previous Quarter Recap
115
▪ The yen dropped a sharp 3.9% in the August-to-October quarter
of 2021. It was little changed through late September, then
Japanese yen per US dollar
114
plunged as the Fed signaled that they are likely to begin tapering
113
their quantitative easing program in late 2021.
▪ Inflation in Japan was still near zero in October, making the Bank
112 of Japan unlikely to taper its quantitative easing program in 2022
or 2023. The divergence between U.S. and Japanese monetary
111 policy fueled the yen’s depreciation in the quarter.
110
Currency Outlook
▪ PNC and the consensus forecast both expect the yen to
109 appreciate modestly in coming quarters.
Aug-21 Sep-21 Oct-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 0.9% in the August-to-October quarter of 2021.
2 year history : 1 year forecast
7.25
Chinese renminbi per US dollar
7.00
6.75
+0.9%
6.50
6.25
Nov-19 Feb-20 May-20 Aug-20 Nov-20 Feb-21 May-21 Aug-21 Nov-21 Feb-22 May-22 Aug-22
Historical Previous Quarter 2-Year Moving Average Bloomberg Consensus Forecast PNC Forecast
3 month history Previous Quarter Recap
6.55
▪ The renminbi appreciated 0.9% in the August-to-October quarter.
Chinese renminbi per US dollar
▪ China’s economy faced several negative shocks in the quarter:
6.50 Lockdowns to fight the Delta wave; regulations that hurt Chinese
tech company profitability; a housing downturn; and electrical
power shortages.
6.45
▪ China’s central bank limited exchange rate fluctuations during
the quarter to prevent renminbi depreciation from further
worsening sentiment toward Chinese capital markets.
6.40
Currency Outlook
6.35 ▪ PNC forecasts for the renminbi to depreciate over the forecast
Aug-21 Sep-21 Oct-21 horizon; the consensus anticipates somewhat less depreciation.
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 appreciated 2.4% on net in the August-to-October quarter of 2021.
2 year history : 1 year forecast
0.80
US dollars per Australian dollar
+2.4%
0.75
0.70
0.65
0.60
0.55
Nov-19 Feb-20 May-20 Aug-20 Nov-20 Feb-21 May-21 Aug-21 Nov-21 Feb-22 May-22 Aug-22
Historical Previous Quarter 2-Year Moving Average Bloomberg Consensus Forecast PNC Forecast
3 month history Previous Quarter Recap
0.76
▪ Higher commodity prices, relaxation of restrictions in Australia and
US dollars per Australian dollar
improved global economic activity supported the Australian dollar.
0.75
▪ Prices of key exports, coal and liquefied natural gas (LNG), surged
49.2% and 38.6%, respectively, in the prior quarter.
0.74
▪ The RBA made a surprise unannounced decision to end its QE
program in late October.
0.73
Currency Outlook
0.72
▪ PNC anticipates a slight depreciation of the Australian dollar over
the next few quarters, while the consensus forecast expects some
0.71 appreciation of the currency.
Aug-21 Sep-21 Oct-21
▪ If the Fed raises interest rates faster than markets anticipate, or
Previous Quarter
economic conditions deteriorate in Australia, the Australian dollar
is likely to be weaker than forecasted.
Source: BloombergCurrency Update
New Zealand Dollar
The New Zealand dollar appreciated 2.6% on net in the August-to-October quarter of 2021.
2 year history : 1 year forecast
0.75
US dollars per New Zealand dollar
0.70
+2.6%
0.65
0.60
0.55
Nov-19 Feb-20 May-20 Aug-20 Nov-20 Feb-21 May-21 Aug-21 Nov-21 Feb-22 May-22 Aug-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 weakened briefly to 68 U.S. cents per
US dollars per New Zealand dollar
New Zealand dollar, a nine-month low, in August, as the
0.72 government announced new lockdown measures.
▪ Weak Chinese manufacturing activity weighed on the New
0.71
Zealand dollar but this was more than offset by the Reserve
Bank of New Zealand’s decision to raise its policy rate at the
0.70 October 5 meeting.
Currency Outlook
0.69
▪ PNC forecasts a slight depreciation of the New Zealand dollar
over the next few quarters, while the consensus forecast
0.68 anticipates some appreciation.
Aug-21 Sep-21 Oct-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 0.7% on net in the August-to-October quarter of 2021.
2 year history : 1 year forecast
78
Indian Rupees per US Dollar
76 -0.7%
74
72
70
68
Nov-19 Feb-20 May-20 Aug-20 Nov-20 Feb-21 May-21 Aug-21 Nov-21 Feb-22 May-22 Aug-22
Historical Previous Quarter 2-Year Moving Average Bloomberg Consensus Forecast PNC Forecast
3 month history Previous Quarter Recap
76.0
▪ The rupee fell in October to the lowest level since June 2020 as
75.5 energy prices surged; India is a net importer of oil.
Indian Rupees per US Dollar
75.0 ▪ Financial market expectations for the Fed to start tapering its QE
program in November, and increased bets on an early initial
74.5 interest rate hike in the U.S., also weighed on the rupee.
74.0 ▪ Softer manufacturing data from China, India’s largest trading
partner, also contributed to a weaker rupee.
73.5
Currency Outlook
73.0
▪ PNC and the consensus forecast both anticipate for the Indian
72.5 rupee to hold mostly steady over the next few quarters.
Aug-21 Sep-21 Oct-21
▪ If Chinese economic data continue to disappoint, oil prices rise
Previous Quarter further, or the Fed raises 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. ©2021 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. ©2021 The PNC Financial Services Group, Inc. All rights reserved. Revision 01.02.2020
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