Dollar Index Weakens Amidst The Yen's Rebound
July 29 2024 - 5:51AM
RTTF2
It was a lackluster week for the Dollar Index - a measure of the
Dollar's strength against a basket of six currencies - as a rebound
in the Japanese yen eclipsed the broad-based weakness in other
major currencies against the U.S. dollar. The yen was supported by
safe have demand and expectations of a rate hike by the Bank of
Japan. During the week ended July 26, the U.S. dollar weakened
against the Japanese yen and the Swiss franc but held its ground
against the euro, the British pound, the Australian dollar, the
Canadian dollar and the Swedish Krona.
The Dollar Index or the DXY slipped 0.08 percent during the week
ended July 26 as it closed at 104.32 versus 104.40 a week earlier.
The week's trading range was a bit wider ranging from the high of
104.56 recorded on Wednesday and the low of 104.08 recorded on
Thursday.
Data released by the U.S. Bureau of Economic Analysis on
Thursday revealed a growth of 2.8 percent during the second
quarter, that boosted the Dollar. Markets had expected the second
quarter's growth to rise to 2 percent from 1.4 percent in the
previous period.
In data released on Friday, the U.S. Bureau of Economic Analysis
showed the year-on-year PCE price index edging down as expected to
2.5 percent in June from 2.6 percent in the previous period. The
core component thereof which was also seen edging down to 2.5
percent however remained steady at 2.6 percent. The month-on-month
PCE price index edged up to 0.1 percent as expected. The core
component thereof which was seen steady at 0.1 percent edged up to
0.2 percent. Nevertheless, the assessment that the U.S. economy was
firmly on the path of disinflation reinforced hopes of a Fed rate
cut in September and limited greenback's gains.
The EUR/USD pair slipped 0.18 percent during the week ended July
26 amidst an unexpected decline in both manufacturing PMI and
services PMI. The HCOB Manufacturing PMI which was seen rising to
46.1 edged down to 45.6 from 45.8 in June. The HCOB Services PMI
unexpectedly declined to 51.9 whereas markets had expected it to
rise to 53 from 52.8 in June. The pair closed at 1.0857 on July 26
versus 1.0877 a week earlier. The euro's moves that ranged between
a weekly high of 1.0904 and a weekly low of 1.0826 came amidst
expectations that the European Central Bank would resume rate cuts
in September.
The sterling too slipped 0.36 percent against the greenback
during the week ended July 26. The GBP/USD pair slipped to 1.2872
from 1.2919 a week earlier amidst expectations of a 50-basis points
rate cut by the Bank of England in its decision to be announced on
August 1. Data released during the week showed a more-than-expected
uptick in manufacturing PMI and a less-than-expected increase in
services PMI. The weekly trading range for the pair was between the
high of 1.2944 recorded on Monday and the low of 1.2849 touched on
Thursday and Friday.
The Australian dollar tumbled more than 2 percent against the
U.S. dollar during the week ended July 26 amidst a global sell-off
in risky assets and weak data from China. The AUD/USD pair which
had closed at 0.6682 on July 19 slipped to 0.6548 by July 26. The
pair ranged between the high of 0.6704 recorded on Monday and the
low of 0.6514 recorded on Thursday. Data released during the week
showed manufacturing PMI edging up and services PMI edging
down.
The Japanese Yen's rebound was the most significant influence on
the Dollar Index during the week ended July 26. Ahead of the Bank
of Japan's interest rate review that would be known on Wednesday,
market speculations of a rate hike and tapering in bond purchases
lifted the yen. With an index weight of 14 percent, the yen's
2.4-percent surge against the Dollar alone dragged down the dollar
index by more than 0.33 percent. The USD/JPY pair slipped 2.4
percent as it plunged to 153.72 from 157.49 a week earlier. The
weekly trading range for the pair was between the high of 157.63
touched on Monday and the low of 151.94 recorded on Thursday.
Markets are eagerly waiting for the Fed's interest rate decision
as well the outcome of the Bank of Japan's decision that would be
known on Wednesday. Amidst the anxiety triggered by renewed
geopolitical tensions in the Middle East, the DXY has jumped to
104.60 whereas the USD/JPY pair has increased to 153.97. Ahead of
the inflation readings from Australia due on Tuesday, the AUD/USD
pair is at 0.6538. The common currency has declined to 1.0819. The
GBP/USD pair has weakened to 1.2847 ahead of Thursday's interest
rate decision to be announced by the Bank of England.