USD closed at 14 year highs last week, largely on the expectations that a fiscal expansion planned by U.S. President-elect Donald Trump will boost inflation and lead to a faster pace of interest rates hikes in 2017. The Fed had raised interest rates by 25 bps in its recently concluded FOMC meet and Fed Chair Janet Yellen gave optimism for 3 instead of 2 rate hikes in 2017. Further, the statement made by Janet Yellen late on Monday that the job market in the U.S. is now the “strongest” in nearly a decade, provided a strong support to the USD against major world currencies. However the killing of Russia’s ambassador to Turkey and a truck ploughing into a crowded Christmas market in central Berlin, killing 12 people and injuring up to 50 others jolted financial markets and led to a slight pull back of the USD.
The Bank of Japan in its Tuesday meeting kept interest rates unchanged at -0.1% and said it would continue to purchase Japanese government bonds at an annual pace of 80 trillion Yen to maintain 10-year JGB yield at around 0%. While the central bank made no change to its policy settings, it did upgrade its assessment of the economy, noting that a “moderate recovery trend has continued”.
USD Index (DXY), which tracks the movement of the USD against six major currencies, gained by 0.06% on a week on week basis and is at a level of 103.01. USD is expected to continue its strength in the coming weeks as positive U.S. data released last week and the upward revision of U.S. GDP will bring in lot of optimism over the strength of the U.S. economy.
U.S. National Association of Realtors on Wednesday reported that existing home sales rose to 5.61 million units in the month of November from 5.57 million units in October against the expectation of a decline to 5.50 million.
U.S. Commerce Department on Thursday reported that U.S. gross domestic product grew at an annual rate of 3.5% in the three months ended 30th September up from a previous estimate of 3.2% and above the expectations for a reading of 3.3%. Preliminary data pegged U.S. growth at 2.9% in the third quarter. The U.S. economy grew 1.4% in the second quarter.
U.S. durable goods orders dropped by 4.6% in the month of November against the expectations for a 4.7% decline. Core durable goods orders rose by 0.5% in the month of November against the expectations for a rise of 0.2%.
U.S. Department of Labour on Thursday reported that the number of individuals filing for initial jobless benefits in the week ended 16th December rose by 21,000 to 275,000 from previous week’s total of 254,000 against the expectation of a rise of 2,000 to 256,000.
U.S. Bureau of Economic Analysis reported that personal spending rose by 0.2% in the month of November against the expectations for a 0.3% gain. Personal income remained flat last month against the expectations for an increase of 0.3%.
U.S. Census Bureau reported that new home sales rose by 5.2% to 592,000 units in the month of November against the expectations for a 2.1% increase to 575,000.
Asian currencies closed mixed last week against the USD. Australian Dollar depreciated by 1.75%, New Zealand Dollar depreciated by 1.28%, Japanese Yen appreciated by 0.51% against the USD and by 0.46% against the Euro. South Korean Won depreciated by 1.59%, Philippines Peso appreciated by 0.46%, Indonesian Rupiah depreciated by 0.42%, Indian Rupee depreciated by 0.08% against the USD and by 0.06% against the Euro, Chinese Yuan appreciated by 0.22%, Malaysian Ringgit appreciated by 0.08% and Thai Baht depreciated by 0.33%.