Last week, the biggest driver for the currency market was the escalation of tensions between the U.S. and North Korea, which sent Japanese Yen sharply higher against the USD. As a rule of thumb, the Japanese Yen and the Swiss Franc perform best during times of war. USD Index (DXY), which tracks the movement of the USD against six major currencies, fell by 0.51% on a week on week basis and is at a level of 93.07. Japanese Yen appreciated by 1.37% against the USD last week.
Market sentiment was hit last week after North Korea said on Wednesday that it was looking at plans for a missile strike on the U.S. Pacific territory of Guam, just hours after U.S. President Donald Trump warned Pyongyang that any threat would be met with “fire and fury”. Trump was responding to reports that North Korea had produced a miniaturized nuclear weapon that can be carried on its intercontinental ballistic missile. Markets were also on edge after a car hit a group of soldiers in a suburb of Paris on Wednesday, in what was described as a deliberate act.
USD started the week on a low note after a sharp surge seen on Friday as the Fed officials attempted to cool rate hike expectations, which were boosted by the release of better-than-expected U.S. monthly job report. U.S. Labour Department on Friday reported that the economy added 209,000 jobs last month against the expectations for an increase of 183,000. The unemployment rate ticked down to 4.3% in July from 4.4%, average hourly earnings increased by 0.3%, in line with the expectation. The strong data has fuelled the expectations that the Federal Reserve will stick to its plans for a third interest rate hike this year. However, St. Louis Fed President James Bullard suggested that low interest rates are “likely to remain appropriate” over the near term.
U.S. Labour Department said on Tuesday that the number of job openings, excluding the farming industry, settled at a record-high 6.163 million in June from 5.702 million a month earlier.
U.S. Bureau of Labour Statistics reported that nonfarm productivity rose by 0.9% in the second quarter, exceeding expectations for an uptick of 0.7%. The report also showed that unit labour costs edged up 0.6% in the three months to June, compared to expectations for a 1.2% gain.
U.S. Commerce Department reported that producer price inflation and its core reading both unexpectedly declined last month. Data showed that producer prices declined by 0.1% in the month of July against the expectation for a gain of 0.1%, followed by 0.1% rise in June.
The core producer price index, that excludes food and energy, also slipped 0.1% in the month of July against the expectation for a gain of 0.2%, followed by 0.1% rise in June. Core producer prices increased at an annualized rate of 1.8% last month against the expectation for a 2.1% increase and a gain of 1.9% in June.
U.S. Department of Labour on Thursday reported that the number of individuals filing for initial jobless benefits in the week ended 5th August rose by 3,000 to 244,000 from previous week’s total of 241,000 against the expectations of a fall by 1,000 to 240,000.
U.S. Commerce Department reported that consumer prices rose less-than-expected last month. Consumer Price Index (CPI) rose by 0.1% in the month of July after being unchanged in June. That lifted the year-on-year increase in the CPI to 1.7% from 1.6% in June against the expectation of 0.2% rise in July and 1.8% rise on annual basis. Core CPI increased at an annualized rate of 1.7% in the month of July largely in line with the expectation.
Euro appreciated by 0.41% against USD last week as the recovery in the euro zone is deepening, which continue to underpin the expectations that the European Central Bank will begin scaling back its monetary stimulus program in autumn. Data showed that the euro zone economy grew by 0.6%, stronger than expectations in the second quarter.
British Pound continue to remain under pressure as it depreciated by 0.2% against the USD last week. British Pound came under pressure after Bank of England left interest rates on hold at record lows in its last policy meet and cut its growth forecasts for wages and the economy amid ongoing headwinds from Brexit.
Asian currencies were mixed last week against the USD. Australian Dollar depreciated by 0.35%, New Zealand Dollar depreciated by 1.32%, Japanese Yen appreciated by 1.37% against the USD and appreciated by 0.96% against the Euro. South Korean Won depreciated by 1.64%, Philippines Peso appreciated by 1.5%, Indonesian Rupiah depreciated by 0.34%, Indian Rupee depreciated by 0.87% against the USD and depreciated by 0.02% against the Euro, Chinese Yuan appreciated by 0.98%, Malaysian Ringgit depreciated by 0.4% and Thai Baht appreciated by 0.21%.