USD Index held steady at nearly 11 year high levels after data showed that U.S. jobless claims fell to the lowest level since the year 2000.
US Jobless claims for the week ending 24th January fell by 43,000 to 265,000 from the previous week’s revised total of 308,000, against expectations of 8,000 decline. The decline in claims indicate continuous improvement in US labour market.
Fed in its policy meet on Wednesday the 28th of January 2015 said that it would be patient on raising rates. The USD Index (DXY), which tracks the movement of the USD against six currencies, rose by 0.1% in the last week and on yearly basis the index is up by 16.92%.
Data released on Friday showed that US consumer sentiment index declined to 98.1 in January from 98.2 seen in the previous month, compared to expectations for a flat reading. Purchasing Managers’ Index rose to 59.4 in January from 58.8 in December against expectation of 57.5.
Bureau of Economic Analysis said on Friday that U.S. gross domestic product rose 2.6% in the last quarter of 2014, down from a previous estimate of 3.0% and from a growth rate of 5.0% in the three months to September.
Euro appreciated on weekly basis against USD by 0.53%, paring its yearly decline to 16.28%. Euro marginally recovered from 11 year low levels against the USD ahead of Fed policy meet on Wednesday but later slipped as Eurostat reported that the annual rate of Eurozone inflation fell by 0.6% in January, after a 0.2% decline in December against economists expectation of 0.5% decline.
In a separate report, Eurostat said the euro zone’s unemployment rate fell to 11.4% in December from 11.5% in the previous month against expectations of a flat reading.
Real depreciated by 3.56% last week against the USD. Economists lowered their forecast for gross domestic product growth in 2015 to 0.13% from 0.38%. Dimmed economic growth outlook makes Brazilian assets less attractive to international investors. Real extended its decline on Friday by 2.5% after Finance Minister Joaquim Levy suggested that the government had no intention of keeping the currency stronger than the market would naturally dictate.
For over year and a half the Brazilian government has intervened in currency markets to prevent weakness in the Real, which was making imports expensive and adding on to the already high inflation.
Russian Ruble came under renewed pressure after the Central Bank of Russia (CBR) surprised markets by cutting interest rates to 15% from 17%, which CBR had hiked from 10.5% a month ago. December rate hike was CBR’s single biggest rate hike since 1998. Central bank explained its decision of rate cut by saying that the risks of an economic slowdown are now higher than the risks associated with the Ruble’s drop. Russian Ruble depreciated by 7.86% against the USD, extending its yearly decline to 49.39%.
Asian currencies were majorly down on weekly basis against the USD. Australian Dollar declined by 2.06%, South Korean Won declined by 0.88%, Indonesia Rupiah declined by 1.68%, Indian Rupee declined by 0.7%, Chinese Yuan declined by 0.35% and Thai Baht declined by 0.56%, whereas Japanese Yen rose by 0.20% and Philippines Peso rose by 0.13%
Australian dollar hit fresh five and a half year lows on Friday as solid US jobs data added further momentum to the USD rally and on rising expectations of rate cut in local interest rate next Tuesday.
Chinese Yuan depreciated by 0.35% against the USD on weekly basis as investors speculated that the PBoC (People Bank of China) may widen the currency’s daily trading range of 2% as early as this weekend giving space for it to depreciate further.
Chinese currency has two different exchange rates, one traded in mainland China known as onshore and the other traded in Hongkong known as offshore. Offshore rate is more open to foreign investors and less subject to state control. When the offshore rate is lower compared to onshore rate then it is typically an indication of weakness in the Yuan.