USD ended last week in positive territory with the USD Index (DXY), which tracks the movement of the USD against six major currencies, rising by 0.69% on weekly basis closing at levels of 96.60. USD started the week on a higher note as positive data released previous to last week supported the currency and comments by Japanese Prime Minster Shinzo Abe on Monday dampened the demand for the Yen.
However mid week, USD pared some of its gains after the release of Fed minutes of its January 2016 policy meet, which raised uncertainty over whether the central bank will raise interest rates this year. Further market sentiment weakened after the Organization for Economic Cooperation and Development (OECD) cut its global growth forecast for this year and warned that some emerging markets are at risk of exchange-rate volatility. The OECD said that global GDP will expand at 3.0% in 2016, which is down from November 2015 prediction of 3.3%.
Japanese Prime Minister Shinzo Abe on Monday told parliament that “excessive currency volatility is undesirable” and added that the country will take appropriate action in the exchange rate market if needed.
Fed January policy meeting minutes released on Thursday showed that policymakers are worried about tighter global financial conditions, which could weigh on the U.S. economy and considered changing their planned path of interest rate hikes in 2016. Fed further added that it would be premature to change their outlook for the U.S. economy and said they would closely monitor global economic developments as well as oil and stock prices.
U.S. data released on Tuesday showed that the Federal Reserve Bank of New York general business conditions index improved to -16.7 in the month of February from a reading of -19.4 in January, against the expectation of a rise to -10.0.
U.S. Commerce Department on Wednesday reported that the Producer price inflation in the U.S. unexpectedly rose in the month of January, while core prices also increased more than estimated. Data showed that producer prices rose up by 0.1% in the month of January against the expectation of a drop of 0.2%, followed by 0.2% drop in December. On yearly basis, the producer price index declined by 0.2% against the expectations of a decline of 0.6%, followed by a drop of 1.0% in December.
The core producer price index rose up by 0.4% in the month of January against the expectation of a rise of 0.1% followed by rise of 0.2% in December. Core producer prices rose at an annualized rate of 0.6% in the month of January against the expectations of a rise of 0.4%, followed by a rise of 0.3% in December.
U.S. Department of Labour on Thursday reported that number of individuals filing for initial jobless benefits in the week ended 13th February declined by 7,000 to 262,000 from the previous week’s total of 269,000 against the expectation of a rise of 6,000 to 275,000.
Euro depreciated by 1.12% against the USD last week. Euro came under early pressure due to broad USD strength but found some support after ECB President Mario Draghi said on Monday that the central bank would not hesitate to act to boost Eurozone growth and inflation, hinting at the possibility of further easing measures. Euro later declined as the ECB minutes from January meeting signalled that the bank is prepared to inject further monetary stimulus next month if necessary to bolster growth and inflation.
Russian Ruble appreciated by 2.16% against USD last week as crude oil prices rallied. Brent crude oil price last week, sharply rose by 9.42% to 34.38 USD/bbl from 31.42 USD/bbl. Sharp surge in oil prices came after Saudi Arabia, Russia and other producers decided to halt oil production growth at January levels, which was initially seen as a bullish development. But later oil markets and Russian Ruble pared gains on the realization that it still leaves oil inventories growing substantially by the end of the year.
Asian currencies were largely mixed against the USD last week. Australian Dollar appreciated by 0.51%, New Zealand Dollar appreciated by 0.08%, Japanese Yen appreciated by 0.55% against USD and by 1.69% against Euro, South Korean Won depreciated by 1.85%, Philippines Peso appreciated by 0.05%, Indonesian Rupiah depreciated by 0.14%, Indian Rupee depreciated by 0.34% against USD and appreciated by 0.23% against Euro, Chinese Yuan appreciated by 0.8%, Malaysian Ringgit depreciated by 1.05% and Thai Baht depreciated by 0.41%.