Global central banks effort to depreciate their currencies seems to be failing. The Bank of Japan’s recent efforts to push down its currency and jump start the economy with negative interest rate policy, resulted in Yen appreciating by 8% against the USD. Yen is at the strongest levels seen since October 2014. ECB is also having a similar problem of Euro appreciating after it took a string of stimulus measures in its recent concluded policy meet.
Global central bank’s policy was the key driver for currency movements globally last week. USD in the early part of the week was trading higher ahead of Fed and Bank of Japan policy meeting but later declined sharply after Fed announced a lower than expected number of rate hikes this year. USD Index (DXY), which tracks the movement of the USD against six major currencies, declined by 1.13% on weekly basis closing at levels of 95.07.
Bank of Japan held its monetary policy steady in its last week’s policy meet, though it downgraded its inflation outlook.
Fed in its policy meet decided to maintain status quo on its monetary policy rates and further said that it is likely to raise interest rates twice this year and not four times, which it had earlier estimated. Fed policymakers also said that the U.S. economy faces risks from an uncertain global economy, although moderate growth and strong labour market recovery would allow the Fed to tighten policy this year.
U.S. Commerce Department on Tuesday reported that retail sales declined by 0.1% in the month of February against the expectations of a decline of 0.2%. Core retail sales, which exclude automobile sales, declined by 0.1% in the month of February against the expectation of a decline of 0.2%.
U.S. producer price index declined by 0.2% in the month of February, which was in line with the expectation. On yearly basis, producer prices remained unchanged against the expectations of a rise of 0.1%. Core PPI, which excludes food and energy, was also unchanged in the month of February against the expectation of a rise of 0.1%.
U.S. Commerce Department on Wednesday reported that housing starts rose by 5.2% in the month of February to 1.178 million units from January’s total of 1.120 million units against the expectation of a rise of 4.6% to 1.150 million.
Number of building permits issued declined by 3.1% to 1.202 million units in the month of February from January’s 1.204 million against the expectation of a decline of 0.1% to 1.167 million units.
U.S. consumer price index fell by 0.2% in the month of February, which was in line with the expectation and following a flat reading in January. On yearly basis consumer prices rose by 1.0% against the expectations of a rise of 0.9%. Core CPI, which excludes food and energy, increased at an annualized rate of 2.3% in the month of February against the expectations of a rise of 2.2%.
U.S. Department of Labour on Thursday reported that number of individuals filing for initial jobless benefits in the week ended 12th March rose by 7,000 to 265,000 from the previous week’s total of 258,000 against the expectation of a decline of 10,000 to 268,000.
Russian Ruble appreciated by 2.15% against USD last week. The currency was boosted after the news that Russia would begin to withdraw its forces from Syria. The Ruble was further supported by the rise in Brent crude oil prices, which on weekly basis rose by 2% and is currently trading at 41.56 USD/bbl.
Asian currencies were largely up against the USD last week. Australian Dollar appreciated by 0.57%, New Zealand Dollar appreciated by 0.81%, Japanese Yen appreciated by 2.07% against USD and appreciated by 0.92% against Euro, South Korean Won appreciated by 2.63%, Philippines Peso appreciated by 0.65%, Indonesian Rupiah depreciated by 0.32%, Indian Rupee appreciated by 0.82% against USD and depreciated by 0.53% against Euro, Chinese Yuan appreciated by 0.35%, Malaysian Ringgit appreciated by 0.84% and Thai Baht appreciated by 0.4%.