USD last week was volatile on rising uncertainty over Fed rate hike this year, in the midst of mixed U.S. economic data. USD Index (DXY), which tracks the movement of the USD against six major currencies, weakened by 0.29% on weekly basis and closed at levels of 94.54.
Weak Chinese economic data added to the USD volatility but has helped Japanese Yen to gain on short covering. Japanese Yen appreciated by 0.69% against USD last week. Chinese data showed that the country’s imports tumbled by 20.4% in the month of September on yearly basis, the eleventh straight monthly decline. Chinese inflation slowed down to 1.6% in the month of September from 2% in August, adding to concerns over deflationary pressures in the world’s second-largest economy.
USD started the week on a lower note as it remained under pressure after Fed’s September policy minutes release. The minutes reinforced expectations that U.S. interest rates will remain on hold well into 2016 after a weak monthly U.S. jobs report dampened the expectations on the timing of an initial rate hike.
USD came under heavy pressure on Wednesday after the release of disappointing U.S. retail sales and producer price inflation data, which further dampened the optimism over the strength of the economy. U.S. Commerce Department reported that retail sales increased by 0.1% in the month of September against the expectations of a rise of 0.2%. Core retail sales declined by 0.3% in the month of September against the expectation of a decline of 0.1%.
Producer price inflation in the U.S. declined for the first time in five months in September. Data showed that it declined by 0.5% in the month of September against the expectation of a decline of 0.2%, while core PPI eased down by 0.3% against the expectation of a gain of 0.1%.
USD recovered sharply on Thursday and managed to pare its early week decline, the gain came after the release of upbeat U.S. data, which has fuelled optimism over the health of the economy.
U.S. Department of Labour on Thursday reported that number of individuals filing for initial jobless benefits in the week ended 10th October declined by 7,000 to 255,000 from the previous week’s total of 262,000 and against expectations of a rise of 8,000.
U.S. Commerce Department reported that consumer prices declined by 0.2% in the month of September, which was in-line with the expectation followed by decline of 0.1% in August. Core consumer prices rose by 0.2% beating the expectations of a rise of 0.1%.
Industrial production declined by 0.2% in the month of September, in-line with the expectations followed by decline of 0.1% in August. Data also showed that U.S. manufacturing production declined by 0.1% in the month of September against the expectations of 0.2% decline.
Euro depreciated marginally by 0.09% against the USD last week after data showed that industrial production in Eurozone declined by 0.5% in the month of August followed by 0.8% rise in July.
Brazilian Real depreciated by 4.09% against USD last week after appreciating 4.51% in the week previous to last. The sharp decline came after Fitch ratings on Thursday downgraded Brazil’s sovereign rating to BBB-, one step above junk, with a negative outlook citing government’s rising debt burden, difficulty in shoring up its budget and a slumping economy.
Standard & Poor’s on 9th September had already downgraded the country’s sovereign rating to non-investment grade and if further downgrade happens then Real will be under heavy selling pressure as some large investment funds are required to sell securities if two agencies rate it junk.
Russian Ruble appreciated by 0.32% against USD last week after gaining sharply by 7.92% against USD in the week previous to last. Ruble is expected to gain further as many hedge funds have started betting on Ruble as oil prices are expected to stay stable and also on expectation that western sanctions imposed on Russia will be lifted as tension in Ukraine eased.
Asian currencies were mixed after posting sharp gains previous to last week on diminishing expectation of Fed rate hike in 2015. Australian Dollar depreciated by 0.98%, New Zealand Dollar appreciated by 1.82%, South Korean Won appreciated by 1.32%, Philippines Peso depreciated by 0.41%, Indonesian Rupiah depreciated by 0.95%, Indian Rupee depreciated by 0.12% against USD but appreciated by 0.2% against Euro, Chinese Yuan depreciated by 0.14%, Malaysian Ringgit depreciated by 1.17% and Thai Baht appreciated by 0.78%.