The Japanese yen declined during the week as new inflation figures raised the possibility that deflation has not yet been completely reversed in the Asian nation’s economy. Core consumer inflation was up only 0.2 percent in the latest figures, against a predicted 0.5 percent raise. All of this called into question the Bank of Japan decision in July to end its zero interest rate policy. At that time, most analysts expected at least one more rate hike before the end of the year, but now another rise is not expected until next year.
As a result of this new data, the yen dropped 0.8 percent during the week versus the euro, to ¥149.68. The Japanese currency also was 1.1 percent lower to ¥88.84 in relation to the Australian dollar, fell 1.3 percent to ¥117.26 against the US dollar, and declined by 1.7 percent to ¥221.46 versus sterling.
Sterling strengthened over the week on positive economic data as well as on the possibility that central banks might be ready to buy more of the UK currency. The pound was up 0.4 percent to $1.8888 versus the US dollar, while it gained 0.7 percent against the Swiss franc to SFr2.3371 and added 0.9 percent to £0.6758 in relation to the euro.
The US dollar was .4 percent higher versus the euro to $1.2767, despite weak housing data.
The euro strengthened slightly on Thursday after the Ifo business climate indicator dropped less than had been expected in August, to 105, slightly offsetting the ZEW business sentiment index decline reported earlier this week.
At mid-afternoon in New York, the euro was 0.1 percent higher against both the Japanese yen and sterling, to ¥148.95 and £0.6762 respectively.
After an early gain in relation to the US dollar, however, the euro dropped after new data was released on US durable goods. Even though the figures were worse than had been anticipated, with durable goods orders down 2.4 percent in July, captial goods orders were up 1.5 percent and most of the drop in durable goods was put to the transport component of the measure.
The US dollar was at 0.1 percent higher versus the euro at $1.2780, while it also gained 0.1 percent on the yen, to ¥116.40. Meanwhile, sterling gained 0.1 percent on the dollar to $1.8940 even though there were analyst warnings that sterling might have come to count too much on demand from central banks.
The New Zealand dollar, meanwhile, was 0.3 percent lower versus the US dollar to $0.6379 on the news that its trade deficit grew significantly in July due not only to one-time items, but also to increased oil imports.
The US dollar had a roller coaster of a day Wednesday after new housing data showed that existing homes sales dropped to 6.33 million in July, the lowest level in over two and a half years, adding yet another reason why many analysts believe that the Federal Reserve will leave interest rates where they are when they meet in September. However, further housing figures that showed US prices on homes continuing to rise, by 0.4 percent in June, sent the greenback up again.
The result of all this activity was to leave the US currency largely unchanged against the euro, the yen, and the Swiss franc at midday. The dollar was at $1.2785 against the euro, at ¥116.44 versus the Japanese yen, and at SFr1.2359 in relation to the Swiss franc. Elsewhere, the greenback dropped 0.2 percent to $1.8920 versus sterling after a report in the UK had factory orders at a 20-month high. The US dollar also dropped 0.4 percent each against the New Zealand and Canadian dollars, to $0.6394 and C$1.1105 respectively.
The news on factory orders in the UK also sent sterling up by 0.2 percent to A$2.4812 in relation to the Australian dollar, while it added 0.3 percent to £0.6756 against the euro and was 0.4 percent higher to SFr2.3399 versus the Swiss franc.
The euro weakened on Tuesday after a new round of figures from the ZEW institute in Germany showed that German investor confidence plummeted in August. Reasons for the decline, which fell from 15.1 in July to -5.6 in August, included the concern that growth could stagnate due to higher oil prices and interest rates as well as a scheduled rise of the VAT in Germany next year. It was the seventh decline in investor sentiment in a row. Still, some analysts believe that the new data will not stop the European Central Bank from raising interest rates again in September.
By the middle of the afternoon in New York, the euro had dropped 0.1 percent to ¥149.20 against the Japanese yen. It was 0.6 percent lower to $1.2810 in relation to the US dollar.
The dollar was higher versus the yen as well, adding 0.5 percent to ¥116.50. The Japanese currency was negatively affected by slumping sales in department stores and supermarkets there. Because these sales contribute a significant portion to the Japanese GDP, declines in sales are likely to cause the Bank of Japan to hold off longer before raising interest rates again.
Sterling, meanwhile, added 0.4 percent to £0.6780 versus the euro after the Bundesbank head, and ECB council member, made comments implying that some of German’s reserves might be transferred from gold into foreign currencies.
The US dollar was weaker on Monday, on what analysts called a delayed reaction to new data last week that showed inflation lower than had been predicted and fewer housing starts than expected among other indications that the US economy is slowing. Most analysts now expect that the Federal Reserve will again decline to raise interest rates in September and quote a less than even chance of a hike in December.
The greenback dropped 0.6 percent against both the Australian dollar and the Canadian dollar, to $0.7637 and C$1.1183, respectively, while it fell 0.7 percent versus the euro to an 11-week low of $1.2911. The US currency also dropped 0.8 percent versus sterling and the Swiss franc, to $1.8968 against the UK currency and to SFr1.2226 in relation to the Swiss currency.
The Japanese yen also weakened, with analysts citing slowing growth in the Japanese economy, core inflation there under control, and the fact that another interest rate hike by the Bank of Japan is not likely to occur anytime soon. The yen fell 0.7 percent to a new low against the euro of ¥149.56, while it dropped 0.8 percent to ¥88.47 versus the Australian dollar and 0.9 percent to ¥219.64 in relation to sterling.
In other Asian currencies, the Chinese renminbi was up fractionally to Rmb7.9656 versus the US dollar, its highest point in relation to the greenback since last year’s revaluation.
Sterling was lower this week as a number of indicators led to the conclusion that the August move by the Bank of England to raise interest rates would likely not be followed immediately by further rate hikes. Even though some analysts still expect rates to rise in the UK one more time this year, data on inflation and unemployment put even that possibility in question.
During the week, the UK currency dropped 0.5 percent to $1.8807 against the US dollar, while it was 0.9 percent lower to ¥217.74 in relation to the Japanese yen and declined 1.2 percent to £0.6811 against the euro.
The Australian dollar was also down during the week, dropping 1 percent to $0.7581 versus the US dollar, while it fell 1.5 percent to ¥87.78 in relation to the yen. The decline came as testimony from the governor of the Reserve Bank of Australia did not support the expectation that interest rates in Australia would rise to 6.25 percent in November.
The yen dropped to ¥148.94 versus the euro on Friday, a new low, hurt by interest rate differentials. Elsewhere in Asian currencies, the Chinese renminbi was slightly stronger at the end of the week at Rmb7.974 to the dollar in the wake of a roller coaster week that had some analysts believing that the tight rein on the Chinese currency was about to be loosened.
In emerging currencies elsewhere in the world, the South African rand dropped 3.1 percent to R6.9833 versus the dollar, while the Hungarian forint declined by 3.2 percent to Ft278.74 to the euro on news of increasing public debt.
Sterling was weaker on Thursday after gains last week in the wake of the Bank of England’s surprise move to raise UK interest rates. Even though most analysts expect the Bank or hike rates one more time this year, new data that show inflation up less than expected for both producers and customers, higher than expected unemployment numbers, and lower retail sales all have some less than convinced that another rise in rates is coming anytime soon. Retail sales were down 0.3 percent in July, against a predicted 0.2 percent rise in buying.
The UK currency was 0.1 percent lower against the US dollar to $1.8937, while it dropped 0.3 percent versus both the euro and the Swiss franc to £0.6795 and SFr2.3228 respectively and was down 0.5 percent in relation to the Japanese yen, to ¥218.53.
Other major currencies saw little movement. The yen did manage to gain 0.2 percent to ¥148.50 against the euro. Among other Asian currencies, the Chinese renminbi added 0.25 percent to Rmb7.9686 to the dollar.
The Australian dollar weakened on the session, dropping 0.4 percent to A$2.4788 in relation to sterling. The Aussie was 0.5 percent lower versus the greenback to $0.7635 and it fell 0.9 percent to ¥88.11 against the yen.
In Europe, the Norwegian krone was down after its central bank raised interest rates by a quarter point on Wednesday, dropping to NKr8.1132 versus the euro and to SKr1.1244 against the Swedish krona.
The dollar weakened again on Wednesday as new data showed that consumer price inflation grew less than had been expected in July. The new report, coupled with a weak producer price report on Tuesday, is persuading many analysts that interest rates in the United States might have reached a high point. Core consumer prices were up 0.2 percent in July, while they had been expected to be 0.3 percent higher. Industrial production figures were also lower in July, further indicating that the US economy is slowing down.
The greenback suffered from sell-offs, dropping 0.2 percent to ¥115.72 in relation to the Japanese yen and falling 0.6 percent to $1.2860 versus the euro.
Sterling was also weaker after the latest Bank of England monetary policy committee meeting minutes indicated no more likely rises in UK interest rates soon. While the MPC voted 6 to 1 to raise rates this month, it said that it did so in order to reduce the need for later rate hikes. The UK currency fell 0.2 percent against the euro, to £0.6766. However, the data from the United States allowed sterling to add 0.3 percent versus the US dollar, to $1.9002.
The yen was 0.3 percent lower against the euro to ¥148.83, while elsewhere in Asia the Chinese renminbi was at R7.9885 to the dollar.
The US dollar was weaker on Tuesday on weak new economic data that analysts believe will decrease the chance of interest rates being raised in September. Producer price inflation was up only 0.1 percent in July, less than had been expected, with core inflation actually down 0.3 percent. In addition, the Empire State manufacturing survey dropped from 15.6 in the previous survey to 10.3 in the latest data. These two reports outweighed a report showing that net inflows were at $75.1 billion in June, more than covering the June trade deficit of $64.8 billion.
At midday in New York, the greenback was 0.3 percent lower against sterling and the Canadian dollar, to $1.8947 and C$1.1226 respectively, while it had fallen 0.6 percent versus the euro to $1.2784 and had declined by the same percentage to ¥115.96 in relation to the Japanese yen. In addition, the US dollar dropped 0.7 percent to the Australian dollar to $0.7647.
The yen, meanwhile, fell to an all-time low against the euro at ¥148.61. Also in Asian currencies, the Chinese renminbi lost 0.28 percent to the US dollar to sit at Rmb8.0015. It was the renminbi’s biggest one-day decline since last year’s revaluation and very close to the 0.3 maximum movement permitted in a day.
Major currencies saw little movement on Monday while emerging currencies declined amid a lack of new data. Some analysts put the losses to profit-taking, while others cited Friday’s healthy retail sales data from the United States and accompanying talk of further interest rate rises there.
The Polish zloty and the Czech koruna each dropped 0.3 percent in relation to the euro, to 3.876 zlotys and Kc28.975 respectively. The Hungarian forint was 0.9 percent lower versus the euro, to Ft272.6.
Meanwhile, the South African rand and the Australian and New Zealand dollars were all lower against the US dollar. The rand dropped 0.8 percent to R6.8375 as the prices for gold and other commodities dropped. The Australian dollar was 0.7 percent lower to $0.7596. Meanwhile, the Kiwi lost 0.3 percent to $0.6310 after rising to $0.6373, a ten-week high, as retail sales date came in higher than had been expected.
Sterling was down early after factory gate inflation data implied that UK manufacturers are having trouble passing their higher costs on to consumers, but the British currency later rose to end the session only fractionally weaker against the dollar and the euro, to $1.8892 and £0.6737 respectively.
The euro was little changed versus the US dollar at $1.2729, while the Swiss franc remained at SFr1.5795 against the euro and at SFr1.2413 in relation to the greenback.
The Bank of England’s decision to raise interest rates in the UK strengthened sterling on Thursday. The surprising nature of the hike - most analysts did not expect the Monetary Policy Committee to raise rates this month - meant an extra boost for the UK currency.
Sterling added 0.5 percent in relation to both the US dollar and the euro, to $1.8865 and £0.6778 respectively. The UK currency was 0.6 percent higher to SFr2.3243 against the Swiss franc, a one year high. In addition, it gained 1 percent versus the Japanese yen to ¥217.26 and was up 1.1 percent in relation to the Australian dollar, to A$2.4813.
While the European Central Bank also raised interest rates in the Eurozone as well, the rate hike there was expected and did not benefit the euro to as great an extent. The shared currency did add 0.5 percent to ¥147.27 versus the yen, but an early gain in relation to the US dollar could not be sustained and the euro ended the session even against the greenback at $1.2792.
Elsewhere, the South African rand was up again, adding 0.9 percent to R6.840 to the dollar. The gain was attributed to a rate hike to 8 percent by South Africa’s Reserve Bank.
In emerging European currencies, the Icelandic krona was 1 percent higher to IKr70.65 versus the US dollar, while the Polish zloty gained 0.5 percent to 3.908 zlotys to the euro.
Sterling strengthened on Wednesday as new data on retail and construction gave traders confidence. In addition, some traders bet that the Bank of England will raise interest rates when the Bank’s Monetary Policy Committee meets on Thursday even though most analysts believe there is only about a 15 percent chance that such a rate hike will materialize.
The UK currency added 0.1 percent to $1.8779 in relation to the US dollar, while it gained 0.3 percent to £0.6814 versus the euro and was up 0.4 percent to SFr2.3082 against the Swiss franc.
The US dollar was mixed on the session, with a slight gain against the euro, to $1.2789 and no real movement at all versus the yen to ¥114.51. However, the greenback was 0.3 percent lower in relation to the Canadian dollar to C$1.1263. In addition, the US currency was 0.6 percent lower to R6.883 against the South African rand.
In Australia, the central bank raised interest rates by a quarter of a percentage point to 6 percent, but the Australian dollar still fell 0.3 percent to $0.7636 against the US dollar.
Emerging European currencies were up, with the Hungarian forint up 0.7 percent to Ft272.33 in relation to the euro and the Icelandic krona 0.5 percent higher to IKr71.32 versus the US dollar.
The US dollar strengthened somewhat on Tuesday after newly released economic data revived speculation about the possibility that the Federal Reserve could raise interest rates again when it meets next week. Also helping the greenback were comments by new US Treasury secretary Hank Paulson, who repeated the “strong dollar” policy of that agency. Among the new data reported was the rise to 2.4 percent of the core personal consumption expenditure deflator, which is the Fed’s favorite inflation measure. In addition, the prices paid component of Supply Management’s manufacturing index was up two points to 78.5.
All of these news items helped the US dollar to gain 0.3 percent to ¥115.02 and 0.2 percent to C$1.1336 versus the Canadian dollar. However, the greenback was just about even at $1.2767 in relation to the euro and it dropped 0.1 percent to $1.8697 against sterling.
The Japanese yen was weaker not only in relation to the US dollar, but it also dropped 0.3 percent versus the euro to ¥146.83 and fell 0.4 percent against sterling to ¥215.08.
Sterling was stronger after Italy said that a quarter of its cash reserves are now in pounds. The UK currency was at £0.6827 in relation to the euro and at SFr2.3041 against the Swiss franc.
Politics in Mexico send the peso lower for the second day in a row as supporters of the losing candidate in last month’s presidential election held a mass rally. The peso was 0.6 percent lower to 11.02 pesos to the dollar.
The yen was slightly stronger on Monday as new data showed industrial production up and as the renminbi hit a new high in China. Trade was light during the day as investors waited for interest rate decisions from several regions. There are possible rate hikes coming this week in Australia, South Africa, the UK and the eurozone. Meanwhile in the US, the Federal Reserve meets next week.
Japanese industrial production was up by 1.9 percent month-on-month in June, topping an expected 1.3 percent rise. Production had declined in May. In addition, the renminbi closed out the trading day at Rmb7.969. The Chinese currency finished the month 0.35 percent higher than it started, its biggest monthly gain since last year’s revaluation.
The yen gained 0.2 percent on the US dollar, the euro, and the Australian dollar to ¥114.42, ¥146.05, and ¥87.68 respectively. After an initial gain versus sterling, the yen settled back to ¥213.75 in relation to the UK currency.
The greenback held its own against the Euro and the Swiss franc, to $1.2760 and SFr1.2312 respectively, but it dropped 0.3 percent to $1.8670 in relation to sterling. One reason for the dollar’s lack of positive movement could be a report that said the International Monetary Fund is currently overvalued by 15 percent to 35 percent, although some analysts said that the report from the IMF was nothing new.
The US dollar weakened on Thursday as the Federal Reserve’s “Beige Book” report, released on Wednesday, provided anecdotal evidence that US economic growth is beginning to slow even though a new report showed that durable goods orders were up more than expected while unemployment levels were down.
The greenback was down 1.5 percent in the past two days to 115.44 versus the Japanese yen, while it has dropped 1.3 percent in the past two days to sterling, to $1.8633, and is 1.4 percent lower in relation to the Australian dollar in the same period, declining to $0.7630 to the Aussie.
The euro remained about the same in relation to the US dollar after having gained 1.1 percent against the greenback on Wednesday, as it sat at $1.2732 on Thursday. The euro was also lower against the yen, down 0.5 percent to ¥147.10. The shared currency also dropped 0.3 percent against both the Swiss franc and sterling, to SFr1.5728 against the franc and to £0.6834.
In China, the renminbi hit a new high versus the US dollar since its revaluation last year as it hit Rmb7.9748. Two US senators have said that they will advance their legislation to put a 27.5 percent tariff on Chinese goods sold in the United States if China does not raise the value of the renminbi “significantly” by the end of September.
The Norwegian krone added 0.4 percent to NKr7,8911 to the euro as unemployment there dropped to its lowest level in five years. Meanwhile, the New Zealand dollar dropped 0.4 percent to $0.6194 to the US dollar as the Reserve Bank implied that interest rates won’t soon rise there.
The US dollar strengthened Monday, but analysts disagreed on exactly why the greenback notched gains after three days of declines. Some called the gains a correction, while others felt it had to do with speculators who are betting that China will use the 1-year anniversary of the revaluation of the renminbi as an excuse to revalue the Chinese currency again.
Whatever the reason, the US dollar added 0.4 percent to a three-month high of C$1.1418 in relation to the Canadian dollar, while ti gained 0.5 percent versus both the Japanese yen and sterling, to ¥116.67 and $1.8491 respectively. The greenback was up 0.6 percent to $1.2633 against the euro. Meanwhile, in China, the renminbi was down fractionally to Rmb 7.9871 to the US dollar.
The Swiss franc weakened during the day. It dropped 0.2 percent versus the euro to SFr1.5744, while it fell 0.3 percent against sterling to a one-year low of SFr2.3050. The Swiss currency was down 0.4 percent to ¥93.56 in relation to the yen and fell 0.9 percent to SFr1.2463 versus the US dollar.
In Hungary, the forint added 1,.6 percent to Ft273.44 against the euro in the wake of a hike in the Hugnarian interest rate to 6.75 percent. Elsewhere, the Russian rouble fell 0.2 percent to Rbs26.922 versus the US dollar after Russian President Vladimir Putin questioned the strength of his nation’s currency.
Sterling was stronger as analysts began to be more and more convinced that UK interest rates will be higher by the end of the year as several measures of economic health seem to be showing the UK economy to be in good shape. Figures from the housing markets, retail sales, the money supply, consumer price inflation, and the growth of the gross domestic product all point to a greater chance that the Bank of England will soon hike rates, possibly as soon as next month.
The UK currency added 1.1 percent to $1.8582 versus the US dollar, while it was 0.8 percent higher in relation to the euro, to £0.6824. Sterling was also 1.2 percent higher against the Japanese yen to ¥216.21 and it gained 1.3 percent to SFr2.2991 versus the Swiss franc.
The US dollar endured changing sentiment during the week. Early in the week, most analysts were betting that interest rates would be raised again in August but by the end of the week, after Congressional testimony by Federal Reserve chairman Ben Bernanke, the majority had changed their minds about the possibility of such a rate hike. The greenback was 0.2 percent stronger in relation to the yen by the end of the week to ¥116.35, but it had lost 0.2 percent to the euro, to $1.2678.
Elsewhere, the New Zealand dollar was 0.9 percent higher versus the US dollar to $0.6248, while the South African rand had added 2.4 percent to R7.015 to the dollar and the Icelandic krona added 2.1 percent to IKr73.45 to the dollar.
The US dollar weakened on Wednesday after Federal Reserve Chairman Ben Bernanke told a Congressional committee that both economic growth and the growth of inflation could be slowing down soon. While far from predicting an economic crash, the comments led most analysts to cut the chance that the Fed will raise interest rates in August despite new data that showed core inflation up more than had been expected.
The greenback dropped 0.2 percent versus both the Japanese yen and the Swiss franc, to ¥117.07 and SFr1.2498 respectively, while it fell 0.4 percent to $1.2557 in relation to the euro and was down 0.7 percent to $1.8376 against sterling.
Sterling strengthened in relation to other currencies as well, despite the fact that the release of minutes from the most recent Bank of England meeting showed that all seven members of the monetary policy committee had voted to keep interest rates at 4.5 percent. Besides its gain against the US dollar, sterling added 0.2 percent to £0.6832 versus the euro, was up 0.4 percent to SFr2.2967 in relation to the Swiss franc, and gained 0.5 percent to ¥215.10 versus the yen.
Emerging currencies benefited from the speculation that US interest rate rises will soon end. The South African rand added 1.2 percent to R7.071 versus the greenback while the Icelandic krona was up 1.5 percent to IKr74.26 to the dollar.
The US dollar was stronger on Tuesday as several dollar-positive reports were released. Producer prices for finished products were 4.9 percent higher, indicating that consumer inflation data, due to be released on Wednesday, will also be higher. In addition, inflows into the United States were at $69.6 billion May, enough to cover that month’s trade deficit.
The dollar was up 0.2 percent to $1.2495 in relation to the euro, while it also added 0.2 percent versus the Japanese yen to ¥117.44 and it was up 0.4 percent against the Swiss franc, to SFr1.2529.
The greenback was, however weaker in relation to sterling, dropping 0.4 percent to $1.8264. Sterling was also stronger versus the euro, the yen, and the Australian dollar. The UK currency added 0.6 percent to £0.6842 versus the euro, while it was up 0.7 percent to ¥214.51 against the yen and by the same percentage to A$2.4479 versus the Australian dollar.
Sterling was aided by an increase in consumer inflation, which was up 0.3 percent on a month-on-month basis in June. Along with recent data from the housing sector, analysts saw the higher inflation numbers as tending to favor future rises in UK interest rates.
Elsewhere, the New Zealand dollar was up 0.7 percent to $0.6252 in relation to the US dollar. The latest increase brought the kiwi up 5.3 percent since it hit a low at the end of June. Higher inflation and surging retail sales in New Zealand have some analysts saying that interest rates, now at 7.25 percent, could go higher.
The dollar strengthened on Monday as investors looked for safe places to put their money as conflict in the Middle East seemed to be getting worse by the day. In addition, new data showed that US industrial output was up in June, and US Federal Reserve chairman Ben Bernanke is expected to leave the door open to further interest rate hikes when he testifies before the Senate Banking Committee on Wednesday.
The US currency was 0.9 percent higher to $1.2524 versus the euro after going as high as $1.2511 earlier in the day. In addition, the dollar was up 0.8 percent in relation to sterling, to $1.82, while it added 0.6 percent against the Japanese yen to ¥117.07.
The Swiss franc was 0.9 percent lower versus the US dollar, to SFr1.248.
Reports that consumer price inflation in the Eurozone was at 2.6 percent in June, right where it had been in May, the euro weakened slightly, dropping 0.1 percent versus sterling to £0.6879, while it was down 0.2 percent in relation to the yen, to ¥146.64.
The yen declined to eight-year lows against both sterling and the Swiss franc to ¥213.85 and ¥94.34 respectively.
Elsewhere, the Icelandic krona was down 1.3 percent to IKr96 in relation to the euro.
