Asian currencies were largely down against the USD last week. Japanese Yen declined by 0.06% South Korean Won declined by 0.21%, Philippine Peso declined by 0.48%, Indonesian Rupiah declined by 0.68% and Thai Baht declined by 0.31%. Indian Rupee declined by 0.15% against the USD and by 0.14% against the Euro.
The INR is trending down to levels last seen in October 2013 but this time around, the policy makers are not really worried about the fall. In fact they do seem to want the INR to depreciate given the 17% fall in exports in the first quarter of this fiscal year. However, if the INR fall leads to capital flows turning slow or even negative, the policy makers could have a rethink on their weak INR policy.
USD started last week on a low note ahead of the two day Fed policy meeting. USD Index (DXY), which tracks the movement of the USD against six currencies managed to post a gain of 0.09% on weekly basis despite initial weakness.
Major gains came on Thursday after the Fed released its policy statement on Wednesday, which stated that the economy and the labour market have continued to strengthen and reinforced rate hike expectations as soon as September if the economy continued to improve as expected.
USD also found strong support coming in from U.S. GDP data, which was released by the U.S. Commerce Department on Thursday. The report stated that U.S. gross domestic product expanded at an annual rate of 2.3% in the second quarter of 2015 compared to first quarter revised growth of 0.6%. GDP estimates were below expectations of 2.6% growth but the report still indicated that the economy is on a solid footing.
On Monday, U.S. Commerce Department reported that total durable goods orders increased by 3.4% in the month of June beating expectations for a gain of 3.0%. In the month of May total durable goods orders declined by 2.1%. Core durable goods orders grew by 0.8% in the month of June against the expectation of an increase of 0.5%.
Data released on Tuesday showed that U.S. consumer confidence deteriorated in the month of July. Conference Board reported that index of consumer confidence fell to 90.9 in July from 99.8 in June and against the expected reading of 100.
On Wednesday, National Association of Realtors reported that U.S. pending home sales unexpectedly fell in the month of June. Data showed that pending home sales index fell 1.8% to 110.3 in June against the expectations for a 1.0% gain.
U.S. Department of Labour on Thursday reported that number of individuals filing for initial jobless benefits in the week ended 25th July rose by 12,000 to 267,000 from the previous week’s total of 255,000 and against expectations of a rise of 15,000 to 270,000.
University of Michigan on Friday reported that U.S. consumer sentiment index ticked down to 93.1 in the month of July from 93.3 in June, against the expectations for a rise to 94.0.
Euro started the week on a high note by appreciating on Monday by around 1.01% but ended the week flat. Formal talks between Greece and its international creditors on a new bailout package is underway. A new agreement must be reached before 20th August, when Greece has to repay more than 3 billion Euro to the European Central Bank.
Euro came under pressure after the release of the Fed policy statement. Eurozone inflation data released on Friday provided some support to the Euro, data showed that the Eurozone’s consumer price inflation rose 0.2% in the month of July, which was in line with expectations and remained unchanged from the previous month. Core CPI increased by 1.0% in the month of July, which was above expectations of a rise of 0.8%.
Brazilian Real depreciated by 1.94% against the USD last week, the major decline came on Friday after worse-than-expected government debt data raised investor fears of a credit downgrade. Previous to last week, the government’s economic team reduced its primary surplus budget target for the year from 1.2% of GDP to 0.15% of GDP. The change was met with a negative reaction from the markets and saw the currency plunge to a 12-year low level.
On Friday, Brazilian government registered a primary deficit of USD 470 million in the first half of 2015, the deficit is the worst since 1997. In June alone the deficit reached USD 2.4 billion. In the same period last year, the government recorded a surplus of USD 5 billion for six months.
Russian Ruble depreciated by 5.05% against the USD under the pressure of cheaper oil. Brent crude oil prices declined by 5.33% on weekly basis from 55.15 USD/bbl to 52.21 USD/bbl. The decline came a day after the Russian central bank halted its daily purchases of foreign currency in an attempt to stop a week long slide. Russia’s central bank on Friday cut its key interest rate by 50 basis points from 11.5% to 11%.
Australian Dollar (AUD) appreciated by 0.36% against the USD last week and is awaiting new directional cues. The RBA (Reserve Bank of Australia) is due to deliver its monetary policy announcement on Tuesday.