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ASX this week: US dollar strength in focus

ASX this week: US dollar strength in focus

The rally in the US dollar is likely to continue this week, as market pricing showed it’s almost certain the US Federal Reserve will raise interest rates in December.

The S&P/ASX 200 index, Australia's benchmark stock index, fell 0.2% last week to 5,359.4, as iron ore, gold and the Australian dollar tumbled.

On Friday:

  • Brent oil gained 0.8% to US$46.86 a barrel, posting a weekly increase of 4.7%
  • WTI crude rose 0.6% to US$45.69 a barrel; up 5.3% for the week
  • Iron ore with 62% content delivered to Qingdao, China, dropped 1% to US$72.79 a dry metric tonne, extending its weekly loss to 8.8%
  • Spot gold fell 0.7% to US$1,207.89 an ounce; down 1.6% for the week
  • Australian dollar traded at 73.38 US cents, weakening 2.8% over the week; the currency was little changed at 73.34 US cents at 11:42am Sydney time today

What to watch this week

The US dollar, which has outperformed all 16 major currencies post-US election, is likely to sustain its rising momentum this week, according to CommSec.

US President-elect Donald Trump is expected to fulfil his promise of cutting taxes and lifting infrastructure spending, which resulted in a rally in growth-focused stocks in the material and industrial sectors, CommSec said.

"While market pricing for a [US] rate hike in December 2016 is almost 100%, the market is pricing only one more rate hike in 2017.

"We think that is too few rate hikes for an economy close to full employment and about to receive Mr Trump's large fiscal stimulus in 2017," it said.

In a basket of 16 major currencies, the Canadian dollar was the best performer against the greenback from 9 November to around noon on 21 November, having weakened 0.4%, while the South African rand sank 6.9%, according to Bloomberg data. The Australian dollar ranked 13th with a decline of 3.9% over the same period.

A weaker Australian dollar might be beneficial to Australian exporters but may hurt importers. The Reserve Bank of Australia has been showing a preference for a lower AUD - a target of around 65 US cents - to support the country's economic growth.

Meanwhile, US financial markets will close on Thursday to observe Thanksgiving, and hold shorter trading sessions the next day, dubbed 'Black Friday', as the Christmas shopping season starts.

Stock movers

Below are the five best- and worst-performing ASX 200 stocks for the week ended Friday, November 18.

Company/Index

ASX code

Weekly price change

BT Investment Management

BTT

+14.8%

Costa Group Holdings

CGC

+9.5%

Myer Holdings

MYR

+8.7%

Altium

ALU

+8.5%

Orocobre

ORE

+7.3%

S&P/ASX 200

XJO

-0.2%

Evolution Mining

EVN

-14%

Saracen Mineral Holdings

SAR

-16.3%

Aconex

ACX

-18.1%

Whitehaven Coal

WHC

-19.3%

iSentia Group

ISD

-20.5%

Past performance is not a reliable indicator of future performance. Source: Bloomberg

This article is intended to provide general information of an educational nature only. It does not have regard to the financial situation or needs of any reader and must not be relied upon as financial product advice. The inclusion of companies in this article does not constitute a recommendation and it’s vital to remember that the value of shares in any company can fall as well as rise, which means you could lose money by investing in them. Investors should consult a range of resources, and if necessary, seek professional advice, before making investment decisions in regard to their objectives, financial and taxation situations and needs because these have not been taken into account. Any securities or prices used in the examples given are for illustrative purposes only and should not be considered as a recommendation to buy, sell or hold. Past performance is not indicative of future performance. Commonwealth Securities Limited ABN 60 067 254 399 AFSL 238814 (CommSec) is a wholly owned but non-guaranteed subsidiary of the Commonwealth Bank of Australia ABN 48 123 123 124 AFSL 234945 and a Participant of the ASX Group and Chi-X Australia.