USD Index (DXY), which tracks the movement of the USD against six currencies, posted a decline of 1.39% last week. The decline was largely on account of profit taking by traders on statements made U.S. President Barack Obama and by Governor of BoJ Haruhiko Kuroda. USD declined despite upbeat U.S. jobs data for the month of May, which showed that U.S. economy added 280,000 jobs against expectations of 225,000 job additions.
USD came under pressure after U.S. President Barak Obama on Tuesday in Germany told the G7 summit attendees that strong USD is a problem for the US economy. On the subsequent day, BoJ Governor Haruhiko Kuroda made a statement that Yen may not decline further against the USD even if the Federal Reserve raises interest rates, as the rate hike is already priced in the market. The Yen appreciated by 1.34% on the Governor’s statement.
On Thursday USD recovered and pared some of its decline after the release of U.S. economic data. U.S. Commerce Department reported that retail sales increased by 1.2% in May against the expectations of 1.1% gain. Retail sales in the month of April gained 0.2%. Core retail sales that excludes automobile sales rose by 1% in May against the expectation of 0.7% rise, it increased by 0.1% in April.
U.S. Department of Labour on Thursday reported that number of individuals filing for initial jobless benefits in the week ended 6th June rose by 2,000 to 279,000 from the previous week’s total of 277,000 and against expectations of flat reading.
University of Michigan (UoM) reported that consumer sentiment index rose to 94.6 this month from a reading of 90.7 in May, compared to expectations for an increase to 91.5. UoM also reported that inflation expectations for the next 12 months is down to 2.7% in June from 2.8% in May.
Euro appreciated for a second consecutive week by 1.37% against the USD. Euro gained majorly on Monday by 1.6% after the release of upbeat data, which showed that Eurozone consumer price index rose by 0.3% from a year earlier in May, following a flat reading in April against expectations of an increase of 0.2%. German industrial production rose 0.9% in April, exceeding the expectations of 0.5% gain. However the uncertainty over Greece cash-for-reform deal led to the Euro coming under pressure as IMF pulled out from the Greece debt talks.
Greece’s bailout agreement with the European Union and the International Monetary Fund is set to expire at the end of this month and it cannot make further debt repayments without a new deal. Greece has already postponed a payment of 305 million Euro to the International Monetary Fund that was to be made on 5th June, stating that it would bundle all the payments due this month into one, which means that Greece will have to make payment of USD 1.54 billion by 30th June.
Brazilian Real appreciated by 0.73% against the USD. Real gain came in the early part of last week due to broad weakness in USD. Later it declined after lower house delayed voting on budget measures by a week, which has raised concerns over President Dilma Rousseff’s effort to preserve national credit rating by passing fiscal-austerity bill in congress.
Russian Ruble appreciated by 1.37% against the USD after touching two month low levels. Rising crude oil prices gave support to the currency. Brent Crude oil in the last week rose by 3.76% from 62.17 USD/bbl to 64.51 USD/bbl. Central Bank of Russia said that it would keep on buying foreign exchange to build reserves and also indicated that the bank wants to keep ruble within a range of about 50 to 60 against the USD.
Asian currencies were largely down against the USD last week. Japanese Yen declined by 1.82%, South Korean Won declined by 0.31%, Philippines Peso declined by 1.18%, Indonesia Rupiah declined by 0.34%, Thai Baht declined by 0.62% and Chinese Yuan declined by 0.09%. Indian Rupee declined by 0.48% against the USD and declined by 1.29% against the Euro whereas Australian Dollar rose by 1.42%.
Indian Rupee depreciated due to capital outflows. In the last week FIIs sold USD 705 million of debt and equity, which put the pressure on the INR despite Current account deficit (CAD) narrowing sharply in the fourth quarter of fiscal 2014-15. CAD narrowed to USD 1.3 billion or 0.2% of GDP.