The U.S. Dollar did not move much last week, and showed mixed results overall in terms of its performance against the other major currencies.
Traders reported that the primary shock to the Dollar’s fortunes was the news out last Thursday that U.S. Initial Jobless Claims had risen to the psychological 500K mark “” considerably above the market’s expectations for the number of 478K. Also, the previous number was upwardly revised from 484K to 488K, which did not help matters at all.
The Greenback gained modest ground against the Euro, Pound Sterling and Canadian Dollar, rising 0.3%, 0.4% and 0.7% respectively against those major currencies. However, the U.S. Dollar gave back some of its recent gains against the Japanese Yen and New Zealand Dollar by falling respectively -0.7% and -0.3% against those currencies.
Observers noted that the sustained threat of intervention by the Bank of Japan has kept the U.S. Dollar from falling further against the Japanese Yen. Nevertheless, seemingly unconcerned comments about the current level for USDJPY by former head Japanese currency official Eisuke “Mr. Yen” Sakakibara on Tuesday kept the Yen supported for the latter part of last week.
In addition, the Dollar was more or less flat versus the Aussie on the week, with AUDUSD closing just 3 pips lower on the week as uncertainty surrounded the Australian Parliamentary Election that resulted in a hung parliament.
Dollar Performance Mixed Last Week
The largest rise in the Greenback last week against the other majors was seen against the Canadian Dollar, where the U.S. Dollar gained 0.7%. The Loonie weakness came on the back of reduced Bank of Canada rate hike speculation after last week’s release of a disappointing Canadian Core CPI number that showed an unexpected drop of 0.1% for the month versus the market’s consensus for a rise of 0.1%.
This modest but significant rise in USDCAD was followed in magnitude by the Dollar’s gains versus the Pound Sterling against which the Dollar rose 0.4% on the week.
Although the Greenback was largely unchanged versus the Aussie, it came off the most against the Japanese Yen “” showing an overall 0.7% drop on the week largely on the back of the aforementioned Yen supportive comments by Mr. Sakakibara.
The New Zealand Dollar also gained at the U.S. Dollar’s expense by posting a 0.3% rise in the NZDUSD exchange rate on the week. The Kiwi was boosted by the New Zealand PPI Input number that came out showing a rise of +1.4% for the quarter. This was substantially above the market’s consensus for a +0.6% rise. Also, New Zealand PPI Output gained by a higher than expected +1.1% compared with the market’s consensus for a +0.7% increase.
The market seems to have taken these higher N.Z. Producer Price Index numbers as increasing the chances of an upcoming hike in the New Zealand’s benchmark Official Cash Rate by the RNBZ and this generally supported the Kiwi.
Forex Market Implications
The forex market basically treaded water last week, refusing to take the Dollar far in either direction against the other major currencies.
This relatively quiet period allowed some of the more dramatic and apparently corrective movements upward seen the previous week in the Greenback to consolidate the exchange rates at new valuation positions.
Since the fundamental outlook for the United States continues to be questionable, shorting the U.S. Dollar remains the favored longer term play at these levels. This short Dollar strategy even makes some sense against the Japanese Yen where the Greenback is trading close to its fifteen year lows
Weekly Recap and Outlook for the U.S. Financial Markets and Dollar – 8/23/2010 The U.S. Dollar turned in a mixed performance last week, rising against the Euro, Sterling and Loonie while declining against the Yen and the Kiwi and ending virtually unchanged against the Aussie. Read full report
Weekly Recap and Outlook for EURUSD – 8/23/2010
EURUSD traded in a range during much of last week. The rate rose initially on Monday in the wake of weaker U.S. numbers that were released the Friday before, but it then erased all of its gains and fell even lower. Monday also saw the pair benefiting from the news that Eurozone CPI had come out at 1.7% for the year and Core CPI printed at 1.0%. Both numbers were more or less in line with market expectations. In addition, U.S. TIC Long Term Purchases were out on Monday and showed a rise of $9 Billion to $44.4 Billion versus the preceding $35.3 Billion reading. This was a substantial improvement over the $36.3 Billion consensus that was anticipated. Read full report
Weekly Recap and Outlook for GBPUSD – 8/23/2010
GBPUSD began last week on a stronger note, but then traded off of its weekly high of 1.5700 that was seen last Monday to show a small loss for the week. The Pound was undermined by news of the U.K. Rightmove HPI falling by -1.7% on the month against the previous reading of only -0.6% and of an improvement in U.S. TIC Long Term Purchases of $9 Billion to $44.4 Billion versus the preceding $35.3 Billion reading. This was a substantial improvement over the $36.3 Billion consensus that was anticipated. Cable then came under additional selling pressure on Tuesday after U.K. Core CPI gained just 2.6% on the year against a market consensus for a 3.0% rise, while U.K. CPI fell to 3.1% on the year from 3.2%, as expected. Read full report
Weekly Recap and Outlook for AUDUSD – 8/23/2010
AUDUSD traded in a tight consolidation range last week, although the rate began the week on a positive note in spite of news coming out that Australian New Motor Vehicle Sales had fallen by -2.6%. This was considerably below the previous print of a -1.2% decline that also saw a minor downward revision to -1.4%. Read full report
Weekly Recap and Outlook for NZDUSD – 8/23/2010
NZDUSD started last week off by trading softer in spite of the preceding week’s favorable New Zealand Retail Sales data. The rate improved from its weekly low print of 0.6994 seen on Monday despite the lack of any notable economic data coming from New Zealand. NZDUSD then started rallying impressively on Tuesday as risk appetite started to return to the market and after the Greenback saw its weekly low versus the Japanese Yen. Read full report
Weekly Recap and Outlook for USDJPY – 8/23/2010
USDJPY managed to fall a bit further last week, but the rate nevertheless traded in a tight range for much of the week. The rate began the week by coming off from its weekly high print of 86.23 that was seen on Monday after U.S. Treasury yields came off sharply and in spite of a lower than expected Japanese GDP number that only managed to rise a mere 0.1% on the quarter against the anticipated 0.6% rise the market was looking for. Read full report
Weekly Recap and Outlook for USDCAD – 8/23/2010
USDCAD traded with considerable volatility last week within its existing consolidation pattern. The rate began last week on a favorable note by rallying as high as 1.0461 on Monday before dropping sharply after Tuesday’s release of Canadian Manufacturing Sales that showed the number had risen by 0.1% on the month “” considerably better than the market’s expectations for a fall of -0.4%. Also on Tuesday, Canadian Foreign Securities Purchases were up by only C$5.39 Billion against the anticipated C$9.42 Billion rise and versus the much higher C$23.04 Billion number seen the previous month. Read full report
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