USD ended the week in positive territory largely on the back U.S. tax plan, hawkish comments made by Federal Reserve Chair Janet Yellen and the release of upbeat U.S. economic data. U.S. President Donald Trump unveiled a plan on Wednesday calling for lower tax rates for businesses and individuals as part of a comprehensive overhaul of the U.S. tax code. Fed Chair Janet Yellen said on Tuesday that the Federal Reserve needs to continue gradual rate hikes despite broad uncertainty about the path of inflation. She also added that “it would be imprudent to keep monetary policy on hold until inflation is back to 2%”. USD Index (DXY), which tracks the movement of the USD against six major currencies, rose by 0.98% on a week on week basis and is at a level of 93.08.
Republicans in the U.S. Congress and the White House unveiled plans to change America’s tax code in a proposal that slashes taxes on businesses and the wealthy, lowering the corporate rate from 35% to 20%. Market participants however, mulled over the lack of detail on how on the tax reform will be funded, fueling fears that key elements missing from the plan could invite pressure from support industry groups and lobbyists.
USD started the week on a high note as market digested weekend elections in Germany and New Zealand, while concerns over tensions between the U.S. and North Korea seemed to subside. Further, the upbeat remarks by New York Federal Reserve President William Dudley on Monday added to the gains. Dudley said the Fed is on track to gradually raise interest rates given factors depressing inflation are “fading” and the U.S. economy’s fundamentals are sound.
However, Chicago Federal Reserve Bank President Charles Evans commented that the U.S. central bank should wait until there are clear signs that income and prices are rising before raising interest rates again, warning that moving too fast would be a policy “misstep.”
Chancellor Angela Merkel won a fourth term in office on Sunday but will have to build a coalition to form a government as Conservatives lost support in the face of a surge by the anti-immigration Alternative for Germany (AfD).
Commerce Department said on Tuesday that new home sales decreased 3.4% to a annual rate of 560,000 units last month, which was the lowest level since December 2016 against the expectation of new home sales rising 3.3% to a pace of 588,000 units.
In a report, the Conference Board reported that its index of consumer confidence decreased to 119.8 this month from a reading of 120.4 in August.
Durable goods orders rose 1.7% in August from the prior month, the Commerce Department reported, easily beating the expectation for a 1.0% rise. The upbeat data pointed to an increase in business investment and offset concerns over the possible impact of Hurricanes Harvey and Irma on growth.
U.S. Gross domestic product increased at a 3.1% annual rate in the April-June period, the Commerce Department reported in its third estimate on Thursday, beating a previous estimate of 3%.
U.S. Department of Labour on Thursday reported that the number of individuals filing for initial jobless benefits in the week ended 23rd September rose by 12,000 to 272,000 from previous week’s total of 260,000 against the expectations of a rise by 10,000 to 270,000.
Asian currencies were broadly lower last week against the USD. Australian Dollar depreciated by 1.61%, New Zealand Dollar depreciated by 1.65%, Japanese Yen depreciated by 0.46% against the USD and appreciated by 0.69% against the Euro. South Korean Won depreciated by 0.77%, Philippines Peso depreciated by 0.39%, Indonesian Rupiah depreciated by 1.19%, Indian Rupee depreciated by 0.74% against the USD and appreciated by 0.62% against the Euro, Chinese Yuan depreciated by 0.94%, Malaysian Ringgit depreciated by 0.53% and Thai Baht depreciated by 0.68%.