Asian currencies this week were majorly up after weak U.S. economic data and on Fed’s dovish statement but the gains are expected to be short-lived as the Fed sticks to its plan to raise interest rates.
In a statement released on Wednesday, the Fed stated that U.S. economic growth has moderated and that interest rates will rise at a slower pace than previously forecast. The Fed also dropped a reference to being “patient” on the timing of rate hikes but added that the change in its forward guidance did not mean it has decided on the timing for an initial rate increase.
Australian Dollar appreciated by 1.81%, Japanese Yen appreciated by 1.13%, South Korean Won appreciated by 0.52%, Indonesian Rupiah appreciated by 0.62%, Indian Rupee appreciated by 0.8%, Chinese Yuan appreciated by 0.88% and Thai Baht appreciated by 1.12% whereas Philippines Peso declined by 1.47%. The INR declined by 1.8% against the Euro.
USD Index (DXY), which tracks the movement of the USD against six currencies was down by 2.41% in the last week, the decline was largely attributed to the weak U.S. economic data and Fed statement. The index on yearly basis is up by 22.23%.
On Thursday, Philadelphia Federal Reserve reported that its manufacturing index deteriorated to a reading of 5.0 this month from February’s reading of 5.2 against the expectation of a rise to 7.1.
U.S. Commerce Department in its report stated that U.S. housing starts declined by 17.0% last month to hit 897,000 units from January’s total of 1.081 million units, worse than expectations for a decline of 2.4% to 1.049 million.
U.S. current account deficit widened to USD 113.5 billion in the fourth quarter from USD 98.9 billion in the third quarter against the expectation of USD 103.2 billion.
US Jobless claims for the week ending 14th March rose by 1,000 to 291,000 from the previous week’s revised total of 290,000, against the expectations of 2,000 decline to 292,000.
Euro appreciated by 3.10% in the last week against the USD, breaking its four week losing streak after European Union leaders said that Greece has agreed for a new reform plan in order to secure the additional bailout funds required to prevent the country’s bankruptcy.
Euro also found support after the ZEW Centre for Economic Research report showed that its index of German economic sentiment rose by 1.8 points to 54.8 in March from February’s reading of 53.0. Euro zone consumer price inflation fell 0.3% last month, in line with expectations.
Brazilian Real appreciated by 0.55% against the USD last week and on yearly basis it has depreciated by 28.03%. The gain came after Federal Reserve FOMC minutes showed that the central bank is not in a rush to hike interest rates, keeping demand intact for high yielding assets from emerging markets.
Russian Ruble appreciated in the last week by 4.96% against the USD on the speculation that looming corporate tax payments will offset the effect of crude oil prices decline. This month Russian companies are due to pay USD 21 billion in taxes. Crude oil prices on weekly basis was up by 1.19% (Crude Oil (Brent) is at 55.32 USD/bbl).