USD came under pressure last week on rising tensions between the U.S. and North Korea, a top Federal Reserve official urging caution over further rate increases until the pace of inflation improved and hurricanes causing disaster in the US. USD Index (DXY), which tracks the movement of the USD against six major currencies, fell by 1.58% on a week on week basis and is at a level of 91.35.
USD started the week on low note on Monday as Friday’s disappointing U.S. employment data and ongoing tensions with North Korea continued to dominate market sentiments. Investors remained cautious following North Korea’s latest provocation, when it conducted a test of a hydrogen bomb intended to be mounted on an intercontinental ballistic missile. U.S. Defence Secretary James Mattis on Sunday warned North Korea that any threat to the U.S. or its allies would be met with a “massive military response”.
U.S. further warned on Monday that North Korea was “begging for war” but asked the UN to respond to Pyongyang’s test of its largest and most powerful nuclear bomb with tougher sanctions to deter the regime from conducting further nuclear tests.
Fed governor Lael Brainard on Tuesday said that the U.S. central bank should be cautious about raising interest rates amid the economy’s “persistent failure” to reach its 2% inflation target. Minneapolis Federal Reserve Bank President Neel Kashkari said the Federal Reserve’s recent interest rate hikes may be slowing inflation and inflicting “real harm” on U.S. economic growth.
USD on Thursday found some sort of support after U.S. President Donald Trump concluded a surprise deal with Democrats in Congress to extend the debt ceiling, providing government funding until 15th December and potentially avoiding an unprecedented default on U.S. government debt.
U.S. factory orders declined in July, sparking concerns over the strength of the manufacturing sector. Factory orders declined by 3.3% in the month of July which was largely in line with the expectation, followed by 3.2% rise in June.
Institute of Supply Management reported on Wednesday that U.S. service sector activity increased slightly less than expected in August. The Institute of Supply Management (ISM) said its non-manufacturing purchasing manager’s index (PMI) rose to 55.3 in the month of August from the reading of 53.9 in July against the expectation for the index to rise to 55.4.
U.S. Department of Labour on Thursday reported that the number of individuals filing for initial jobless benefits in the week ended 2nd September rose by 62,000 to 298,000 from previous week’s total of 236,000 against the expectations of a rise by 5,000 to 241,000.
Euro appreciated by 1.48% against the USD last week after the European Central Bank left interest rates unchanged as expected on Thursday and signalled that information on the tapering of the central bank’s asset-purchase program would be delivered in October.
Asian currencies were broadly up last week against the USD. Australian Dollar appreciated by 1.07%, New Zealand Dollar appreciated by 1.49%, Japanese Yen depreciated by 2.23% against the USD and appreciated by 0.74% against the Euro. South Korean Won depreciated by 0.40%, Philippines Peso appreciated by 0.63%, Indonesian Rupiah appreciated by 1.01%, Indian Rupee appreciated by 0.38% against the USD and depreciated by 0.78% against the Euro, Chinese Yuan appreciated by 0.99%, Malaysian Ringgit appreciated by 1.8% and Thai Baht appreciated by 0.08%.