The USD Index (DXY), which tracks the movement of the USD against six currencies, fell by 0.11% in the last week and on yearly basis the index is up by 17.06%. The USD will strengthen in the coming weeks on the back of strong US jobs data.
USD came under pressure during early part of the week on the back of U.S. economic reports. The Institute for Supply Management (ISM) said its index of purchasing managers fell to 53.5 for January from a reading of 55.5 in December, worse than the expectation of decline to 54.5. U.S. consumer spending data for December released on Monday fell by 0.3%, the fastest rate since September 2009.
U.S. factory orders data released on Tuesday added further weakness to the USD with factory orders for the month of December declining by 3.4%, worse than the expectations for a decline of 2.2%.
USD weakness continued due to disappointing U.S. trade balance report. Report released on Thursday showed that the U.S. trade deficit widened to USD 46.56 billion in December from USD 39.75 billion in November.
However USD recovered and gained strength on Friday by 1.21% paring its weekly loss, as US jobs data indicated that the country continues to show strength and recovery in its labour market. US Jobless claims for the week ending 31st January rose by 11,000 to 278,000 from the previous week’s revised total of 267,000, against expectations of rise by 23,000 to 290,000.
The Labour Department report showed that U.S. economy added 257,000 jobs in January, beating expectations for an increase of 234,000. December’s figure was revised to a 329,000 gain from a previously estimated 252,000 rise. Report also showed that the U.S. unemployment rate rose marginally to 5.7% in January from 5.6% in December, against the expectation of flat reading.
Euro appreciated on weekly basis against USD by 0.22% and by 0.16%. Euro was supported in the early part of the week on the hope that Greece’s new government would be able to reach a compromise with its international creditors on the terms of its bailout. But on Thursday European Central Bank (ECB) said it would no longer accept Greek bonds as collateral for lending.
Brazilian Real touched a decade low level as it depreciated by 3.56% last week against the USD. In the recent past Brazilian Real has come under tremendous pressure due to Petrobras scandal, which is the nation’s biggest-ever corruption case. Petrobras is the world’s sixth-biggest energy company by assets and is involved across the world in the exploration, production, refining and sale of oil and gas and this state-run company is the backbone of the Brazilian economy. On 29th January, Moody’s Investors Service reduced the rating of the state-run company by one notch to Baa3, the lowest level of investment grade.
Russian Ruble appreciated by 3.90% last week against the USD. Ruble, after heavy punishment towards the end of the week previous to last, gained during the early part of the last week due to rise in the prices of oil and on building optimism that finally the floor might have been located in the oil markets. Currently Crude Oil (Brent) is at a level of 57.8 USD/bbl.
Asian currencies were majorly up on weekly basis against the USD. Australian Dollar rose by 0.44%, South Korean Won rose by 0.36%, Indonesia Rupiah rose by 0.40%, Indian Rupee rose by 0.27%, Chinese Yuan rose by 0.10% and Thai Baht rose by 0.33%, Philippines Peso rose by 0.15% whereas Japanese Yen declined by 1.37%
Australian dollar managed to gain last week despite RBA (Reserve Bank of Australia) statement and despite tepid Australian retail sales and housing data. Reserve Bank of Australia on Friday eased the outlook for inflation to 1.25% for headline CPI by June 2015 from an earlier range of 1.50% to 2.50%. Retail sales rose by 0.2% in December, against the expectations for an increase of 0.4%. In November, it rose by 0.1%. Australia’s new home sales declined 1.9% in December, after a 2.2% rise in November.