USD posted its third consecutive weekly gain against major currencies, largely driven by heightened expectations of a rise in interest rates this year by the Federal Reserve. Comments made by New York Fed President William Dudley and Donald Trump’s failure to register a big win in Wednesday’s presidential debate have hardened the rate hike view. USD Index (DXY), which tracks the movement of the USD against six major currencies, rose by 0.69% on a week on week basis and is at a level of 98.70.
USD started the week on high note as it retained its positive momentum from the previous week after upbeat U.S. retail data and producer price numbers for September released prior to last week reinforced the expectations for a Fed rate hike.
Federal Reserve Vice Chairman Stanley Fischer on Monday said that economic stability could be threatened by low interest rates, but it was “not that simple” for the Fed to hike rates. Fed Chair Janet Yellen has said that the central bank may allow inflation to exceed its 2% target implying that rate hikes will be slow.
On Wednesday, USD came under slight pressure and struggled to continue its positive momentum after U.S. consumer prices suggested underlying inflation was moderating, prompting investors to trim bets on rate hikes. The core CPI, which strips out food and energy costs rose by 0.1% in the month of September after climbing 0.3% in August. The year-on-year increase in the core CPI slowed to 2.2% following a 2.3% rise in August.
USD regained its ground on Thursday and Friday on Euro weakness after the European Central Bank dampened speculation about plans to reduce stimulus program.
Federal Reserve Bank of New York on Monday said that the Empire State manufacturing activity fell to -6.80 from -1.99 in the preceding month against the expectation to rise to 1.
Federal Reserve on Monday reported that the industrial production rose to 0.1%, from -0.5% in the month of September against the expectation for it to rise to 0.2%.
U.S. Census Bureau on Wednesday reported that the number of housing starts fell to 1.047M, from 1.150M in the preceding month against the expectation to rise to 1.175M.
Euro depreciated by 0.8% against USD last week. Euro was under pressure all week but the breakdown occurred after the European Central Bank meeting on the 20th of October. The ECB left its ultra-loose monetary policy unchanged on Thursday but kept the door open to more stimulus in December, with ECB President Mario Draghi dousing recent market speculation that the central bank may begin tapering its 1.7 trillion-Euro asset buying program.
Asian currencies closed mixed last week against the USD. Australian Dollar depreciated by 0.13%, New Zealand Dollar appreciated by 1.04%, Japanese Yen appreciated by 0.37% against the USD and by 1.20% against the Euro. South Korean Won depreciated by 0.22%, Philippines Peso appreciated by 0.18%, Indonesian Rupiah depreciated by 0.07%, Indian Rupee depreciated by 0.26% against the USD and appreciated by 0.85% against the Euro, Chinese Yuan depreciated by 0.57%, Malaysian Ringgit appreciated by 0.38% and Thai Baht appreciated by 0.58%.