The dollar index fell to a 5-week low on Friday and remained below 82 as it looks for the Federal Reserve’s action next week. US dollar had softened this week after the weekly update by the US Department of Labor showed that initial claims for unemployment assistance rose by 7,000 last week even though consumer sentiment increased to six-year high in July 2013. The actions by Fed officials to manage concerns arising from its stimulus withdrawal plans have resulted in the dollar index fall this month.
Earlier Fed chairman Bernanke said the central bank’s asset purchases “are by no means on a preset course” and could be reduced more quickly or expanded as economic conditions warrant. There are expectations that Federal Reserve will keep the monetary policy “accommodative” and not announce any decision to reduce its monthly bond purchases at its upcoming policy meeting. However any strong revival of US economic data could revive hopes of tapering by the Fed in its September meeting.
The euro gained against the dollar this week on account positive economic data in the eurozone. The IFO business climate indicators in Germany ticked up in July, followed by rise in consumer confidence index in Italy. The euro is almost eyeing $1.33.
The combination of strong UK economic data and a more dovish policy outlook of the Fed has sent the pound to a one-month high against the greenback. UK gross domestic product increased 0.6% in the second quarter from 0.3% in the first three months of the year. The pound is close to $1.54.
The Japanese yen rallied as Japan’s core inflation rose at its fastest yearly rate in June since November 2008 and the policies seem to be having a faster than anticipated impact. This in turn dampens the likelihood that additional aggressive easing measures are coming. The yen is below 99 against the dollar. Prices can pick up further in Japan as economic recovery happens and yen weakens.
The dollar/ Swiss franc pair continues to rise and has reached 0.93 after the strong German data last week. The Austrian dollar/dollar after losses in mid of last week recovered as weekly US unemployment data was disappointing and is close to 0.93.
Last week WTI (West Texas Intermediate) fell as US Energy Information Administration (EIA) said US oil production rose to 7.56mn bpd last week, the most since December 1990. Brent fell on account of weak manufacturing data in China, which was at an 11-month low in July 2013. A weaker dollar on account of possible delay of tapering by the Fed drove oil prices. The prices of WTI and Brent have converged recently and WTI ended close to $105/ barrel and Brent above $107/barrel.
Natural gas price is at $3.555 per million British thermal units (MMBTU). Natural gas prices had come down last week after weekly government report showed that US gas stockpiles increased less than expected.
Gold prices had gained on hopes the Fed may delay the tapering and is now at $1321.9 and ounce. Silver is at $19.77/ounce. Copper and aluminium fell on the London Metal exchange over the weekend on concerns of Chinese demand, but recovered on better European data. Copper was close to $7000 a tonne and aluminium $1800 for a tonne.
