USD Index (DXY), which tracks the movement of the USD against six currencies, posted a decline of 0.93% last week. USD started the week on a high note on the expectation that the Fed will give some guidance on interest rate hikes after the release of upbeat economic data prior to last week. But the USD came under heavy selling pressure after the Fed lowered U.S. growth forecast and its interest-rate projections in its FOMC meeting held last week.
USD is expected to continue its decline as markets unwind longs and INR will benefit from broad USD weakness.
On Monday industrial production data showed a decline of 0.2% in May worse than the expected gain of 0.3%, it fell by 0.5% in the month of April. A separate report showed that General Business Conditions Index fell to -2 against the expectation of 6, the reading was 3.1 in May.
U.S. Commerce Department on Tuesday reported that U.S. housing starts declined by 11.1% to 1.036 million units in the month of May against the expectation of a decline of 3.1%.
U.S. Department of Labour on Thursday reported that number of individuals filing for initial jobless benefits in the week ended 13th June fell by 12,000 to 267,000 from the previous week’s total of 279,000 and against expectations of decline of 2,000 to 275,000.
U.S. consumer prices rose by 0.4% in the month of May against the expectation of 0.5% rise, it rose by 0.1% in the month of April. Consumer prices (excluding food and energy) rose by 0.1% in the month of May against the expectation of 0.2% rise.
Euro appreciated for a third consecutive week by 0.76% against the USD despite the negative sentiment on Greece, as the deadlock between Greece and its external creditors continued after talks between Greece and European officials ended without any breakthrough on cash-for-reforms deal. The deadline for Greece repayments to the International Monetary Fund is approaching fast and Greece does not have money to pay the IMF.
IMF Chief Christine Lagarde also said on Thursday that if the payment is not made on time, Greece will be declared to be in default and would disqualify itself from receiving any further IMF funds.
Brazilian Real appreciated by 0.71% against the USD. Real gained as Brazilian business leaders extended support to Finance Minister Joaquim Levy in his effort to reduce budget deficits and preserve the nation’s credit rating.
Russian Ruble appreciated by 2.21% against the USD after the release of better than expected economic data. Russian retail sales fell less than expected in the month of June, the data showed decline of 9.2% against the expectation of 10%. Unemployment rate was at 5.6% in the month of June against the expectation of 5.8%. Whereas Industrial production fell to annual rate of 5.5% in May from the decline of 4.5% in the month of April and against the expectation of a decline of 3.7%.
Asian currencies were largely up against the USD last week. Australian Dollar rose by 0.53%, Japanese Yen rose by 0.55%, South Korean Won rose by 0.68%, Philippines Peso rose by 0.71% and Indonesia Rupiah marginally rose by 0.02%, whereas Thai Baht decline by 0.03% and Chinese Yuan declined by 0.02%. Indian Rupee appreciated by 0.78% against USD and by 0.13% against Euro.