Indian Rupee advanced to its best level in two-weeks against the USD after Federal Reserve Chairperson Janet Yellen suggested that an US interest rate rise is not likely to occur for some time yet. But INR slightly corrected on Friday after contrasting view came from other Federal Reserve officials. The INR will see stability on the back of the Union Budget 2015 focusing on on higher growth, lower inflation and lower fiscal and current account deficits.
USD on weekly basis rose due to U.S. economic data and comments coming in from Federal Reserve officials. The USD Index (DXY), which tracks the movement of the USD against six currencies was up by 1.10% in the last week and on yearly basis the index is up by 19.58%.
USD rallied on Thursday after San Francisco Fed President John Williams and St. Louis Fed chief James Bullard both suggested that the U.S. central bank might end it’s near zero interest rate policy sooner than some traders expect and also added that the USD surge is having marginal impact on the domestic economy and monetary policy. The comment has helped USD to rally and offsetting early week back to back losses due dovish statement made by Fed Chair Janet Yellen in her semi-annual testimony before Congress.
US consumer price index released on Thursday fell by 0.7% in January, but its core reading which excludes food and energy cost rose by 0.2% which is higher than the expectation of 0.1% rise, indicating that prevailing disinflation is largely due to external factor not by domestic factors.
US Commerce Department on Friday said that US GDP grew at an annual rate of 2.2% in the fourth quarter, weaker than the earlier estimate of 2.6%. For 2014 as a whole GDP grew by 2.4% which is slightly better than the 2013 average growth of 2.2%.
US Jobless claims for the week ending 21st February rose by 31,000 to 313,000 from the previous week’s revised total of 282,000, against expectations of 8,000 decline to 290,000.
Euro depreciated on weekly basis against USD by 1.63% and is currently trading at its lowest level in almost 12 years. The decline came as European Central Bank is expected to roll out its first round of quantitative easing program of monthly Euro 60 billion this week.
Brazilian Real appreciated by 1.00% against the USD last week and on yearly basis it has depreciated by 17.49%. During the early part of the week Real depreciated after Moody’s Investors Service cut Brazilian state-run energy giant Petrobras credit rating to junk, pushing down Real by 1.3% against USD. But later on Friday Real recovered by 2.23% paring its weekly decline and managed to post gain.
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.
Russian Ruble appreciated for the fourth consecutive week and in the last week Ruble appreciated by 0.5% against USD. Ruble gained as oil prices rose by 4% on weekly basis. (Crude Oil (Brent) is at 62.58 USD/bbl).
Asian currencies closed mixed on weekly basis against the USD. Australian Dollar declined by 0.43%, Japanese Yen declined by 0.5%, Indonesia Rupiah declined by 0.83% and Chinese Yuan declined by 0.21% whereas South Korean Won rose by 1.29%, Philippines Peso rose by 0.34%, Indian Rupee rose by 0.62% and Thai Baht rose by 0.66%. The INR rose by 2.12% against the Euro.
South Korean Won appreciated as it found support from exporter demand for month-end settlements.
Chinese Yuan declined sharply this week as money flooded out of the country on worries over China’s poor economic growth prospects. Peoples Bank of China on Saturday announced that the one-year bank lending rate would drop 0.25% to 5.35% and that deposit rate would be reduced by 0.25%. It is China’s second interest rate cut in three months.