USD was volatile last week but managed to end the week on the positive side after sharply falling on Thursday. USD swung into losses during the week despite the release of positive U.S. economic data and Fed Chair Janet Yellen staying committed to the central bank’s plans for tightening policy. USD Index (DXY), which tracks the movement of the USD against six major currencies, rose by 0.15% on a week on week basis and is at a level of 100.95.
USD started the week on a positive note after market sentiment for USD was lifted by the expectation of U.S. tax cuts, which would boost corporate profits and investments and also on bets that the Federal Reserve might raise interest rates faster than expected ahead of Janet Yellen’s semi-annual testimony. USD further received support after the meeting between U.S. President Donald Trump and Japanese Prime Minister Shinzo Abe over the weekend, which went better than feared by markets.
In the meeting with Abe, Trump avoided repeating accusations that Tokyo uses monetary policy to devalue its currency to the disadvantage of the U.S. Abe and Trump also agreed to hold an economic dialogue after Trump withdrew the U.S. from the Trans-Pacific Partnership agreement.
USD continued its strength on Tuesday after Federal Reserve Chair Janet Yellen said in the congressional testimony that the Fed would consider raising interest rates at its upcoming meetings if the economy evolves in line with the expectations, adding that waiting too long to remove monetary policy accommodation would be unwise. However, she also expressed caution amid sustained uncertainty over economic policies under President Donald Trump’s administration.
U.S. Labour Department on Tuesday reported that U.S. producer prices rose by 1.6% in the month of January against the expectation of 1.5%, followed by the same reading in December.
U.S. Commerce Department reported that consumer prices increased by 0.6% in the month of January against the expectation for a rise of 0.3%, followed by 0.3% rise in December. Year-over-year, consumer prices rose by 2.5% in January. Core consumer prices, which exclude food and energy costs, rose by 0.3% against the expectations for 0.2% rise, followed by 0.2% rise in December.
U.S. retail sales rose by 0.4% in the month of January against the expectations for a rise of 0.1%, followed by 1% rise in December. Core retail sales, which exclude automobile sales, rose by 0.8% in the month of January against the expectation for a rise of 0.4%, followed by 0.4% rise in December.
USD on Thursday saw sharp declines despite upbeat U.S. economic data. The fall in USD was largely due to the sharp reversal of U.S. treasury yields, which dropped on Thursday after rising for 5 days in a row. Yields fell despite rate hike expectation gaining momentum. 10-year benchmark U.S. treasury yield fell by 6 bps on Thursday after breaking levels of 2.5% on Wednesday and is now currently trading at 2.42%.
U.S. Department of Labour on Thursday reported that the number of individuals filing for initial jobless benefits in the week ended 11th February rose by 5,000 to 239,000 from previous week’s total of 234,000 against the expectation of a rise of 11,000 to 245,000.
Philadelphia Federal Reserve reported that its business conditions index jumped to 43.3 this month from 23.6 in January, which was the highest level since November 2014 and against the expectation of a reading of 18.0.
Data also showed that U.S. building permits issued rose by 4.6% to 1.285 million units in January from 1.210 million in December. However, U.S. housing starts fell by 2.6% to 1.246 million units in January from December’s total of 1.279 million units.
British pound depreciated by 0.63% against USD last week as every piece of U.K. economic data released was weaker than expected. Inflation fell in January, average weekly earnings growth slowed and retail sales turned negative. Eurozone too posted softer data, which led the Euro to depreciate by 0.25% against the USD last week. Eurozone industrial production dropped more than expected and the current account surplus narrowed.
Asian currencies were mixed last week against the USD. Australian Dollar depreciated by 0.13%, New Zealand Dollar depreciated by 0.11%, Japanese Yen appreciated by 0.34% against the USD and by 0.56% against the Euro. South Korean Won appreciated by 0.41%, Philippines Peso depreciated by 0.26%, Indonesian Rupiah depreciated by 0.16%, Indian Rupee depreciated by 0.2% against the USD and by 0.24% against the Euro, Chinese Yuan appreciated by 0.17%, Malaysian Ringgit depreciated by 0.20% and Thai Baht appreciated by 0.21%.