USD started the week on a slightly low note but remained supported amid expectations that the Federal Reserve is on track to raise interest rates in its December policy meet. The market also expected that the Fed will give hawkish guidance for future rate hikes given good economic data and given Trump boost to growth.
USD ended the week on a strong note as the Fed raised interest rates by 25 bps last week and Fed Chair Janet Yellen called the expectations for 3 instead of 2 rate hikes next year as a “modest adjustment,”. The 25 bps increase in the central bank’s benchmark interest rate was widely expected by financial markets but it was the signal that rates were likely to rise faster than expected. USD Index (DXY), which tracks the movement of the USD against six major currencies, gained by 1.34% on a week on week basis and is at a level of 102.95.
Fed Chair Janet Yellen pointed out that uncertainties are exceptionally high leaving room for slower pace of rate hikes but markets are reading the Fed policy as hawkish.
U.S. Commerce Department on Wednesday reported that retail sales rose by 0.1% in the month of November against the expectations for a 0.3% gain. Core retail sales gained by 0.2% in the month of November against the expectation for an increase of 0.4%. A separate report showed that the U.S. producer price index rose 0.4% in the month of November against the expectations for a 0.1% rise.
U.S. industrial production fell by 0.4% in the month of November against the expectations for a 0.2% decline.
U.S. Department of Labour on Thursday reported that number of individuals filing for initial jobless benefits in the week ended 10th December fell by 4,000 to 254,000 from previous week’s total of 258,000 against the expectation of decline of 3,000 to 255,000.
U.S. consumer price index rose 0.2% in the month of November largely in line with the expectations. On yearly basis consumer prices increased by 1.7%.
U.S. Commerce Department on Friday reported that housing starts declined by 18.7% to hit 1.090 million units in the month of November from October’s total of 1.340 million units against the expectation for the reading to fall to 1.230 million units. U.S. building permits dropped by 4.7% to 1.201 million units in the month of November from 1.260 million in October against the expectation of 1.240 million units.
The Philly Fed manufacturing index climbed to a two-year high of 21.5 this month from 7.6 in November against the expectations for a reading of 9.0.
Asian currencies closed largely down against the USD on broad USD strength. Australian Dollar depreciated by 1.95%, New Zealand Dollar depreciated by 2.42%, Japanese Yen depreciated by 2.21% against the USD and by 1.18% against the Euro. South Korean Won depreciated by 1.51%, Philippines Peso depreciated by 0.35%, Indonesian Rupiah depreciated by 0.57%, Indian Rupee depreciated by 0.52% against the USD and appreciated by 0.86% against the Euro, Chinese Yuan depreciated by 0.77%, Malaysian Ringgit depreciated by 1.19% and Thai Baht depreciated by 0.50%.