The Australian dollar pushed to fresh 23-year highs against the US dollar after the US Federal Reserve interest rate decision, but then dipped sharply as global equity markets came under pressure.
Retail sales rose 0.8% in September while there was a 1.2% increase in private-sector credit and a 6.8% increase in building approvals. The firm data maintained expectations of higher interest rates. Indeed, markets priced in over a 90% chance that the Reserve Bank will increase rates next week
The trade deficit was higher than expected at AUD1.9bn for September as exports fell 4.0% over the month.
The Australian dollar will look to gain further short-term support on yield grounds, although capital flows could be increasingly volatile if trade fears increase and failure to increase rates would undermine the local currency.
Canadian dollar
The Canadian dollar strengthened to the highest level since the currency was floated freely in 1970 and hit a high near 0.94 against the US dollar.
The Canadian GDP growth was reported as 0.2% for September as the oil sector remained solid. There was a drop in producer prices for the month due to persistent currency strength.
The government warned over the impact of currency strength with Finance Minister Flaherty stating that much of the gains were due to speculative inflows.
There will be an increased risk of central bank action to weaken the currency given potential damage to the manufacturing sector with volatility liable to increase.
Indian rupee
The rupee held generally strong over the week with highs close to 39.22 against the US dollar which was the strongest level since March 1998.
The evidence suggested that capital inflows were generally firm over the week which helped underpin the currency. The central bank again intervened in the market to curb rupee gains. Increased credit-related stresses weakened the rupee to 39.45 against the US currency on Friday.
The export data offered some reassurance with a 19% annual increase in the year to September, although there were warnings over future trends given the rupee gains.
The rupee will gain support if there are further sustained capital inflows, although volatility will be a key risk over the next few weeks given that international capital flows are liable to be increasingly unstable.