USD held steady at multiyear highs against major currencies despite weak inflation and industrial production data released last week. The weak economic data was later offset by US consumer sentiment data that showed that the index has jumped to the highest level in 11 years. USD Index (DXY), which tracks the movement of the USD against six currencies, rose by 0.66% in the last week and on yearly basis the index is up by 14.35%.
Consumer price inflation fell by 0.4% in the month of December in line with expectations but was higher compared to the 0.3% decline in November. Core CPI which excludes food and energy was flat in December compared to expectations for a 0.1% rise, it rose by 0.1% in the month of November. U.S. industrial production declined by 0.1% in December below expectations of 0.1% rise, after an increase of 1.3% in November. However, University of Michigan said that its consumer sentiment index rose to 98.2 this month, the highest level since January 2004, from 93.6 in December, compared to expectations for a rise to 94.1.
US Jobless claims for the week ending 10th January climbed by 19,000 to 316,000 from the previous week revised total of 297,000, against expectations of 6,000 decline.
Euro depreciated by 2.32% on weekly basis against the USD and posted its fifth straight week of decline. Euro touched 11 year low levels against the USD and is currently trading at a levels of Euro 1.15. Decline came after Swiss National Bank surprised markets by deciding to scrap Swiss Franc threshold of CHF1.2 against the Euro, which it was maintaining since September 2011 as a measure to prevent deflation due to continuous appreciation of safe heaven Swiss Franc against the Euro.
Swiss central bank also cut rates to minus 0.75%, from minus 0.25% and lowered its target range for the three-month Libor to minus 1.25% to minus 0.25%, from minus 0.75% to 0.25%.
Real appreciated by 0.4% last week against the USD on the back of speculation that European Central Bank (ECB) would announce a stimulus program next week that will increase the demand for higher-yielding assets. There is an expectation that economic team appointed by President Dilma Rousseff will revive the growth in the ailing economy, which may attract foreign investors in the first half of the year and give support to the Real.
Real in 2014 came under pressure due to economy slowdown and a widening budget deficit, which prompted Moody’s Investors Service to change Brazil’s credit outlook to negative. Real on yearly basis has depreciated by 10% against the USD. Brazil central bank in order to support Real sold USD 98.3 million of currency swaps on Friday and rolled over contracts worth USD 489.6 million. It plans to offer as much as USD 100 million a day until at least March 31, compared with USD 200 million a day last year.
Russian Ruble posted weekly loss of 5.00% against the USD, extending its yearly decline to 48.83%. Ruble declined as oil fell to 46 USD/bbl during early part of the week.
Asian currencies were majorly up on weekly basis against the USD due to the Fed in its FOMC minutes stating that inflation will be a concern in near term. Australian Dollar rose by 0.23%, Japanese Yen rose by 0.84%, South Korean Won rose by 1.16%, Philippines Peso rose by 0.62%, Indonesia Rupiah rose by 0.45%, Indian Rupee rose by 0.73%, and Thai Baht rose by 0.94% whereas Chinese Yuan remained flat on weekly basis.
Chinese Yuan appreciated during early part of the week but on Friday Yuan depreciated by 0.32% against the USD, paring its weekly gain. Early gains came after China’s exports rose 9.7% in December from a year earlier, beating expectations of 6% growth whereas imports fell by 2.4%, leaving a trade surplus of USD 49.61 billion according to official data released on 13th January. Yuan is expected to face downward pressure as ECB is likely to start its stimulus program, which will strengthen USD.
Indian Rupee appreciated by 0.73% against the USD due to USD selling by exporters and continuous capital flows. FPIs bought shares worth USD 274.03 million on Friday and on weekly basis FPIs bought shares worth USD 310.31 million and debt worth USD 1.401 billion, as per SEBI data.