USD last week gained for five consecutive trading sessions, which was the longest in almost a year. USD broad strength came after Fed officials put weight on April rate hike possibility, which supported the USD throughout the week, despite weak release of U.S economic data. USD Index (DXY), which tracks the movement of the USD against six major currencies, gained by 1.25% on weekly basis closing at levels of 96.27.
USD, before last week’s strength, had weakened sharply after Fed announced a lower than expected number of rate hikes this year, which triggered heavy selling from traders betting on a stronger USD. 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.
However, during the week, many Fed officials in separate appearances sounded hawkish, suggesting that Fed interest rate hike was a live possibility in the Fed’s upcoming policy meet in April. San Francisco Fed President John Williams and Atlanta Fed President Dennis Lockhart said that a rate hike could come as early as next month. However, neither are voting members of the Federal Open Market Committee.
Philadelphia Fed President Patrick Harker said that the central bank should consider another hike as early as next month if the U.S. economy continues to improve and that he would prefer at least three hikes before year end. Whereas Chicago Fed President Charles Evans said that he expects two rate hikes this year, unless economic data comes in a lot stronger than expected or inflation picks up faster than anticipated.
USD was additionally supported by the sudden rise in safe heaven demand on Tuesday after at least 31 people were killed in a series of explosions in Brussels on Tuesday morning, with two blasts at the airport and another at a metro station in the heart of the EU quarter an hour later.
U.S. Commerce Department on Wednesday reported that U.S. new home sales rose by 2.0% to 512,000 units in the month February against the expectations for a 3.2% gain to 510,000 units.
U.S. Department of Labour on Thursday reported that number of individuals filing for initial jobless benefits in the week ended 19th March rose by 6,000 to 265,000 from the previous week’s total of 259,000 against the expectation of a rise of 9,000 to 268,000.
U.S. Commerce Department on Thursday reported that U.S. total durable goods orders, which include transportation items, declined by 2.8% in the month of February against the expectations of a decline of 2.9% followed by rise of 4.2% in January. Core durable goods orders declined by 1.0% in the month of February against the expectation of a decline of 0.2% followed by a rise of 0.2% in January.
Asian currencies were largely down against the USD last week on broad USD strength. Australian Dollar depreciated by 1.33%, New Zealand Dollar depreciated by 1.73%, Japanese Yen depreciated by 1.35% against USD and depreciated by 0.44% against Euro, South Korean Won depreciated by 0.58%, Philippines Peso depreciated by 0.01%, Indonesian Rupiah depreciated by 0.97%, Indian Rupee appreciated by 0.19% against USD and appreciated by 0.50% against Euro, Chinese Yuan depreciated by 0.68%, Malaysian Ringgit appreciated by 0.40% and Thai Baht depreciated by 1.09%.