Subdued 1ST Quarter FX Market Expected To Continue in 2021

The Kina is likely to continue its gradual fall against the U.S. Dollar, while a steady Australian dollar will see improved stability in the Kina/Australian dollar cross rate.

According to BSP’s Pacific and Economic Market Insight, Quarter 1 2021 report, BSP Financial Group Limited (BSP), the Kina has traded flat in the first quarter of 2021, while year-on-year it depreciated 2.4% against the US Dollar, from 0.2920 to 0.2850, as high import demand continued to outweigh the flow of currency into the country.

Rohan George, BSP Group General Manager - Treasury– noted “while the Kina was unchanged against the U.S. dollar in the first quarter of 2021, the USD rallied against most currencies, as higher than expected economic and employment growth created inflationary concerns and fueled speculation that the US Federal Reserve would tighten monetary policy earlier than markets had initially expected.”

FX market liquidity eased in the 1st quarter 2021, with market turnover falling by 8.3% in March and 5.2% over the March Quarter 2021.

Mr. George outlined expected FX inflows for the upcoming quarter, “Despite improving signs in the global economy, foreign exchange market turnover will remain subdued in April and May, with reduced foreign exchange inflows in April following the two weeks OTML Covid-19 process alignment closure, and the absence of foreign currency supplied to the market by Barrick. June will most likely see an increase in half yearly and end of quarter FX inflows and reduce outstanding foreign exchange order bottleneck issues.”

“Time to foreign exchange order execution will be maintained at between two and five weeks over the June Quarter 2021,” said Mr. George.

“To manage reduced FX liquidity, businesses should place FX orders (with correct paperwork), as soon as possible, ensuring orders are cash backed whilst awaiting execution, and that tax clearance certificates are current and reflect the expected FX order execution time.”

BSP Group CEO Robin Fleming affirmed saying, “The Government’s commitment to recommission operations of Pogera mine is a positive move that will also bring foreign exchange into the country and boost local and domestic economic activity.”