Emerging market currencies posted the strongest monthly rally after the Fed adopted a gradual approach to its interest rate increase cycle, which has fuelled the optimism in the market that capital inflows to the emerging markets will be sustained. Commodity prices rebounded on a monthly basis and has provided further support to the emerging market currencies of Brazilian Real, Malaysian Ringgit and Russian Ruble, which on monthly basis appreciated against the USD by 9.58%, 7.94% and 7.11% respectively.
Fed Chair Janet Yellen last week in her speech to the Economic Club of New York on the 29th of March 2016 gave a big dose of booster shot to the global financial markets. Her speech laid to rest speculation on pace of rate hikes, which calmed investors who had been unnerved by a chorus of U.S. central bankers signalling a quicker pace of interest rate hikes.
Fed Chair Janet Yellen indicated a gradual pace for US interest rate increases. In her first comments since the Fed decided to hold rates steady two weeks ago, Janet Yellen said inflation has not yet proven durable against the backdrop of looming global risks, including still low oil prices and concerns over China.
On a monthly basis investors have poured USD 12 billion into equities in India, South Korea, Taiwan and Thailand.
USD started the week on a higher note as the speculation of April interest rate hike was rife following a series of comments from U.S. Federal Reserve officials who supported the case for more interest rate hikes. However USD later came under heavy selling pressure as soft U.S. economic data and Fed Chair Janet Yellen speech pushed out Fed rate hike bets in the near future. USD found bit of support at the end of the week after U.S. economy reported stronger-than-expected U.S. jobs and factory data.
Bureau of Economic Analysis on Monday reported that consumer spending rose by 0.1% in the last month from 0.1% in the preceding month, revised down from 0.5%. Report also stated that U.S. core PCE price index rose by 0.1% in the last month from 0.3% in the preceding month and against the expectation of a rise of 0.2%.
U.S. Labour Department on Friday reported that the U.S. economy created 215,000 jobs in the month of March against the expectations of 205,000, followed by 245,000 jobs in January. The U.S. unemployment rate rose unexpectedly to 5% last month from 4.9% in the preceding month, which was above the expectation of 4.9%.
U.S. Department of Labour on Thursday reported that number of individuals filing for initial jobless benefits in the week ended 26th March rose by 11,000 to 276,000 from the previous week’s total of 265,000 against the expectation of an unchanged reading.
Institute for Supply Management on Friday reported that the ISM manufacturing PMI rose to 51.8 in the month of March from 49.5 in the preceding month against the expectation of a rise to 50.7.
Asian currencies were largely up against the USD last week. Australian Dollar appreciated by 2.26%, New Zealand Dollar appreciated by 3.26%, Japanese Yen appreciated by 1.24% against USD but depreciated by 0.34% against Euro, South Korean Won appreciated by 1.31%, Philippines Peso appreciated by 0.68%, Indonesian Rupiah appreciated by 0.6%, Indian Rupee appreciated by 0.59% against USD but depreciated by 0.98% against Euro, Chinese Yuan appreciated by 0.53%, Malaysian Ringgit appreciated by 3.77% and Thai Baht appreciated by 0.36%.