USD last week rallied and touched its six month high level after the release of strong U.S. monthly job report, which added to expectations for a December rate hike by the Fed. Earlier on Wednesday, Fed Chair Janet Yellen said that a December rate hike is a “live possibility,” depending on economic data. USD Index (DXY), which tracks the movement of the USD against six major currencies, weakened by 2.29% on weekly basis and closed at levels of 99.17.
USD started the week on slightly lower note as U.S. economy previous to last week released a string of downbeat economic data, which dampened the expectation of December Fed rate hike. Release of weak Chinese factory data on Monday added further disappointment to the prospect of rate hike in December.
Activity in China’s manufacturing sector unexpectedly shrank for a third straight month in October fuelling fear that the world second largest economy may be cooling further in the fourth quarter despite number of stimulus measures undertaken by the PBOC to boost the economy.
On Monday, Institute for Supply Management report showed that the manufacturing activity in the U.S. expanded at the slowest rate in more than two years in October. Data showed that index of purchasing managers fell to 50.1 in the month of October against the expectation of 50.0 followed by the 50.2 reading in September.
U.S. Census Bureau on Tuesday reported that factory orders declined by 1.0% in the month of September against the expectation of decline of 0.9% followed by 2.1% in August.
On Wednesday USD gained sharply after the release of strong U.S. employment and trade balance data, which boosted optimism over the strength of the economy.
ADP on Wednesday reported that U.S. non-farm private employment rose by 182,000 in the month of October against the expectation of an increase of 180,000 followed by 190,000 jobs in September.
U.S. Commerce Department separately on Wednesday reported that U.S. trade deficit declined to USD 40.81 billion in the month of September against the expectation of USD 41.1 billion followed by USD 48.02 billion in August.
USD on Thursday came under pressure after U.S. jobless claims data disappointed but remained supported as market was eying Friday release of U.S. monthly job report.
U.S. Department of Labour on Thursday reported that number of individuals filing for initial jobless benefits in the week ended 31st October rose by 16,000 to 276,000 from the previous week’s total of 260,000 and against expectations of a rise of 2,000.
USD major gain came on Friday after U.S. Labour Department reported that the economy added 271,000 jobs in the month of October against the expectation of 180,000 jobs followed by 137,000 jobs in September
U.S. unemployment rate declined to 5.0% in the month of October against the expectation of unchanged reading followed by 5.1% in September.
Euro depreciated by 2.41% against the USD last week. Euro will continue to remain under pressure because of the divergence in monetary policy between the two central banks. Last week Euro came under pressure after ECB President Mario Draghi signalled the possibility for additional easing measures. Draghi said policymakers would re-examine the degree of monetary stimulus already deployed at their December meeting and reiterated that they remained willing to bolster price growth in the Euro area.
Brazilian Real appreciated by 2.31% against USD last week. The gain came after the central bank said it would intervene in the currency market which offset the effect of delayed voting on a measure, which would help to reduce country’s fiscal deficit. Brazil’s central bank offered as much as USD 500 million in two auctions of foreign-exchange credit lines on Thursday.
Asian currencies were lower on broad USD strength. Australian Dollar depreciated by 1.33%, New Zealand Dollar depreciated by 3.75%, Japanese Yen depreciated by 2.04%, South Korean Won depreciated by 0.12%, Philippines Peso depreciated by 0.17%, Indonesian Rupiah appreciated by 0.88%, Indian Rupee depreciated by 0.76% against USD but appreciated by 1.46% against Euro, Chinese Yuan depreciated by 0.57%, Malaysian Ringgit depreciated by 0.23% and Thai Baht depreciated by 0.59%.