Brazilian Real appreciated by 4.51% against USD last week posting its strongest weekly rally since 2011. The gain came after political crises in the country eased as Brazil’s congress postponed voting on whether to back or overturn President Rousseff’s vetoes on two bills that would increase spending over the next few years.
President Dilma Rousseff had reshuffled her cabinet as she tried to rebuild support in Congress and shore up the budget. The bills that she vetoed would raise public spending by 63 billion Real (USD 16.4 billion) over the next four years and include a hefty 78% increase in salaries of judiciary employees and a raise in payments for retirees.
Russian Ruble appreciated by 7.92% against USD last week. The sharp appreciation came on the back of rising crude oil prices. Brent crude oil prices last week rose by 9.39% from 48.13 USD/bbl to 52.65 USD/bbl.
Asian currencies rallied sharply on diminishing hopes for U.S. interest rate hike in 2015. Australian Dollar appreciated by 4.13%, New Zealand Dollar appreciated by 3.97%, South Korean Won appreciated by 3.17%, Philippines Peso appreciated by 1.18%, Indonesian Rupiah appreciated by 9.20%, Indian Rupee appreciated by 1.20% against USD but depreciated by 0.63% against Euro, Chinese Yuan appreciated by 0.19%, Malaysian Ringgit appreciated by 6.91% and Thai Baht appreciated by 2.48%.
The sharp surge seen in Malaysian Ringgit and Indonesia Rupiah against USD came after China reported its foreign currency holdings, which declined in the month of September. The decline in the foreign currency reserve is an indication that the Yuan may not weaken further from current levels. Malaysia and Indonesia are net exporters of industrial commodities like crude oil and compete with China in the international export market.
Broad weakness in USD last week helped global currencies to rally. USD Index (DXY), which tracks the movement of the USD against six major currencies, weakened by 1.06% on weekly basis and closed at levels of 94.81. USD weakened as expectation for interest rate hike by Fed in 2015 diminished after U.S. economy posted weaker than expected monthly job numbers, which showed that the U.S. economy added just 142,000 jobs in the month of September against the expectations of 203,000 job additions.
USD is expected to remain on the lower side in the coming week as Fed’s September meeting minutes released on Thursday added to the diminishing expectation of Interest rate hike this year. Minutes released indicated that policymakers were still watching domestic inflation and the impact of slower global growth when considering interest rate hikes.
USD started the week on a low note and remained under pressure throughout the week as U.S. economy showed string of downbeat economic data. On Monday, Institute of Supply Management reported that its non-manufacturing purchasing managers’ index fell to 56.9 in the month of September against the expectation of 57.5 followed by 59.0 in August.
U.S. trade data released on Tuesday showed that trade deficit widened more than expected in the month of August, dampening optimism over the strength of the U.S. economy. Data showed U.S. trade deficit widened to USD 48.33 billion in the month of August against the expectation of USD 47.4 billion followed by USD 41.81 billion in July.
USD found some support after U.S. Department of Labour on Thursday reported that number of individuals filing for initial jobless benefits in the week ended 3rd October declined by 13,000 to 263,000 from the previous week’s total of 276,000 and against expectations of a decline of 2,000.
Euro appreciated by 1.27% against the USD last week despite string of weak data coming in from Germany which is the bloc’s biggest economy.