USD came under heavy selling pressure after disappointing monthly job data released by U.S. Labour Department on the 3rd of April 2015, which showed that U.S. economy added 126,000 new jobs in March, which is the smallest increase since December 2013 and sharply below the expectation of increase of 245,000 jobs. Later USD found strong support after the release of Fed minutes from latest policy meeting and statement coming in from New York Federal Reserve President William Dudley that the rate hike in June could still be possible if the labour market recovery remained strong.
The minutes of the U.S. Fed’s latest policy meeting showed that several officials believe the economic outlook is likely to warrant an interest rate hike in June. USD Index (DXY), which tracks the movement of the USD against six currencies was up by 2.90% in the last week. On yearly basis USD has strengthened by 25.15%.
U.S. Department of Labour reported better than expected initial jobless claims data, the report showed that number of individuals filing for initial jobless claims in the week ending 4th April rose by 14,000 to 281,000 from the last week’s total of 267,000 against the expectation of a rise by 18,000 to 285,000, giving further support to USD.
Euro depreciated by 3.33% in the last week against the USD as the Eurozone posted weak economic data. Markit reported that the Eurozone’s services purchasing managers index slipped to 54.2 last month from 54.3 in February against the expectation of unchanged reading. Retail sales fell by 0.2% in February in line with expectations.
Euro is expected to remain under pressure whereas USD is expected to strengthen further on speculation that U.S. rate hike in the middle of the year is not ruled out. Market will keenly watch U.S. economic data and anything better for U.S. will lead to drop in Euro.
Brazilian Real appreciated by 1.54% against the USD last week. In the early part of the week, Real continued its previous week’s momentum as President Dilma Rousseff signalled a fiscal consolidation program. But in the later part of the week Real gave up most of its gains after rating agency Fitch cut its outlook on the country’s creditworthiness from stable to negative.
Fitch in its report cited that Brazil is rated as “BBB” which is two notches above junk bond and also mentioned that continued deterioration in the country’s finances is the reason for the revision.
Russian Ruble appreciated in the last week by 5.76% against the USD touching new 2015 highs. The currency which was the worst performer in 2014 has become the best performer in 2015 by gaining 17% (YTD) against USD. Broadly Ruble gained due to stabilization in the crude oil price a key export for the country by which Russia manages to generates half of the country’s revenues. Sharp decline in oil prices along with the imposition of western sanctions over Ukraine conflict were among the main reason for Ruble weakness in 2014.
Crude oil prices on weekly basis were down by 5.31%. Crude Oil (Brent) is at 57.87 USD/bbl), which has given strong support to the currency in the last week as prices are still up from lows of below USD 50/bbl seen a few months ago.
Asian currencies last week were majorly up against USD. Australian Dollar appreciated by 0.64%, South Korean Won appreciated by 0.03%, Philippines Peso appreciated by 0.14%, Indonesian Rupiah appreciated by 0.72%, Indian Rupee appreciated by 0.28% whereas Chinese Yuan depreciated by 0.23%, Thai Baht depreciated by 0.42%.The INR appreciated by 2.36% against the Euro.