USD started last week on a high note but remained volatile throughout the week due to mixed U.S. economic data. USD Index (DXY), which tracks the movement of the USD against six major currencies, managed to post a gain of 0.23% on weekly basis to close at levels of 97.81. The index is likely to touch 100 levels in the coming weeks after the Federal Reserve Bank of Atlanta President Dennis Lockhart, indicated his support for a September interest rate hike.
USD is expected to gain in the coming weeks on the back of positive U.S. economic data, which shows continuous strengthening of the U.S. economy and raising the expectation that the Fed will hike interest rate as early as September.
On Monday last week USD surged as data released showed that U.S. personal spending rose in line with expectations in June. U.S. personal spending rose 0.2% in the month of June compared to 0.7% increase in May. U.S. personal income rose by 0.3% in the month of June beating the expectations of 0.2% rise. USD pared some of its day’s gain as ISM report showed that index of purchasing managers (PMI) fell to 52.7 in the month of July from a reading of 53.5 in June and against the expectation of 53.5.
USD extended its gain on Tuesday as data showed that U.S. factory orders rose broadly in line with expectations in the month of June. U.S. factory orders rose by 1.8% in the month of June compared to a decline of 1.1% in May.
On Wednesday, ADP reported that non-farm private employment rose by 185,000 in the month of July which was below the expectations of an increase of 215,000. ISM reported that non-manufacturing purchasing manager’s index rose 60.3 in the month of July which was well above the expectation of 56.2.
U.S. Department of Labour on Thursday reported that number of individuals filing for initial jobless benefits in the week ended 1st August rose by 3,000 to 270,000 from the previous week’s total of 267,000 and against expectations of a rise of 6,000 to 273,000.
U.S. Labour Department on Friday reported the U.S. economy added 215,000 jobs in the month of July against the expectations of an increase of 223,000 whereas the economy has created 231,000 jobs in June. U.S. unemployment rate remained unchanged at 5.3% in July, which was in line with the expectations.
Euro depreciated by 0.15% against the USD last week, decline largely came on Monday after the Greek stock market posted steep losses in the first day of trade following a five-week shutdown after capital controls were imposed to prevent a financial collapse in Greece. Athens stock index fell almost 23% at the open, before recovering slightly on Monday.
Euro found some support after data on Monday showed that the Euro area manufacturing sector continued to expand at a steady pace at the start of the third quarter. Eurozone manufacturing purchasing managers’ index for July came in at 52.4, up from the initial estimate of 52.2.
Brazilian Real depreciated by 2.45% against the USD last week, the major decline came on Thursday as the currency tumbled by more than 2.4% and touched 12 year low levels. The drop is the currency’s biggest one day decline since May. The decline came after the lower house overwhelmingly voted to increase spending. The vote is the latest setback for President Dilma Rousseff, who is struggling to restore the country’s public finances in order to avoid losing the country’s investment grade rating due to falling growth and growing political instability.
Russian Ruble depreciated by 3.62% against the USD under the pressure of cheaper oil as the currency continued to follow sliding oil prices trajectory. Brent crude oil prices declined by 5.54% on weekly basis from 52.21 USD/bbl to 49.32 USD/bbl.
Asian currencies were mixed against the USD last week. Australian Dollar appreciated by 1.51%, New Zealand Dollar appreciated by 0.46%, South Korean Won appreciated by 0.24%, Indian Rupee appreciated by 0.5% against USD and by 0.77% against Euro. Japanese Yen declined by 0.28%, Indonesia Rupiah declined by 0.1% and Thai Baht declined by 0.38%.
Australian Dollar appreciated last week against USD as data showed that Australia’s retail sales increased by 0.7% in June, beating expectations for a 0.5% gain. A separate report showed that Australia’s trade deficit narrowed to AUD 2.93 billion in June from AUD 2.68 billion in May and against the expectation of widening to AUD 3.10 billion. Reserve Bank of Australia decided to hold its benchmark interest rate at 2.00% in its meet last week.