Market round-up: Dollar’s good fortunes are here to stay

The dollar index is now in the high 93-100 range that was last seen in 2015, said DBS Bank in a recent research note


Currencies belonging to high-growth economies such as India, Indonesia and Vietnam have outperformed peers while those like the Chinese yuan, Thai baht, Malaysian ringgit and Korean won have disappointed. Photo: Bloomberg
Currencies belonging to high-growth economies such as India, Indonesia and Vietnam have outperformed peers while those like the Chinese yuan, Thai baht, Malaysian ringgit and Korean won have disappointed. Photo: Bloomberg

The dollar appreciated sharply in October against an array of currencies on the back of expectations of a rate hike by the US Federal Reserve in December.

The dollar index is now in the high 93-100 range that was last seen in 2015, said DBS Bank in a recent research note.

But within emerging market currencies, especially from Asia, the performance has varied.

Currencies belonging to high-growth economies such as India, Indonesia and Vietnam have outperformed peers while those like the Chinese yuan, Thai baht, Malaysian ringgit and Korean won have disappointed.

India being the fastest growing economy in Asia, excluding Japan, the forecast for the rupee is positive for 2017, according to DBS Bank.

Broadly, the dollar’s rally still has steam left, DBS Bank said, adding that the outcome of the US presidential elections are a key uncertainty.

Large US drug distributor cuts profit outlook

McKesson Corp., a distributor of drugs in the US, reduced its annual profit forecast, citing competition and unfavourable pricing activity in the market.

“Our updated outlook for fiscal 2017 reflects McKesson’s expectation of a lower profit contribution resulting from recent customer pricing activities and lower operating profit as a result of further moderating branded pharmaceutical pricing trends compared to previous expectations,” the company said in a statement last week.

The commentary underlines intense competition in the US, the largest market for domestic pharmaceutical companies. Drug makers such as Dr Reddy’s Laboratories Ltd have already pointed to heightened competition in the US in their latest quarter results.

But an earnings forecast cut from a large drug distributor in the region reflects the challenging market conditions and how it is weighing on earnings of companies across the value chain.

Loan securitization volumes zoom

The issuance of pass-through certificates (PTC)—debt instruments that have an underlying pool of loans—trebled in the first half of the current fiscal year, driving the total volume of loan securitisations to Rs45,000 crore, according to Crisil Ratings.

The ratings agency expects loan securitizations to hit an all-time high volume of Rs1,000 crore in 2016-17 going by the current momentum in activity.

Vehicle loans that were bundled and sold off formed 52% of PTCs issued.

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