The dollar index saw its best since 2014 as all the major currencies damaged by trade war which raised concerns over global economic growth.
How various currencies in the G10 block fared in 2018?
Nine out of ten currencies were painted red into year-end; especially commodity currencies loonie and Aussie dollar were leading the way downward. Majors Euro and Pound were down by more than 5.00% followed by Danish Krone, Swedish Krona and Norway Krone down by 5.00% each. Only one currency was favorable on the year; safe haven currency Yen was up by 2.75%.
Commodities and commodity currencies tumbled as higher dollar tends to have an inverse correlation on commodity prices. However, Palladium price soared more than 18.00%, printed the best in metal space.
The Canadian dollar weakened the worst in three years among G10, fell 11.00% in 2018 vs. 18.00% in 2015 followed by an Aussie dollar with -10.00% in 2018. The commodity-based currencies AUD, CAD, and NZD need a strong Chinese economy and stabilized oil prices. The higher dollar made a massive dip in the commodity exporter of resources as Aussie dollar depends on Iron ore, Canadian dollar on Oil prices and New Zealand dollar on dairy prices.
Forwarding into 2019, we believe that the continuation of the trade war could further dampen the global growth eventually dampen the commodity currencies further. Overall, the impact of trade war concerns will be the focal point in 1Q 2019. Besides in major currency pairs, there is a chance we could see further consolidation in the current ranges and most probably could face selling pressure at last week’s high.
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