New Zealand and Canadian central banks change outlook
Over the past week, the US dollar has slowly but surely gained against all of its rivals. At the close of New York trading on Friday (Saturday morning, Sydney), the Dollar Index (USD / DXY), a prime indicator of the value of the greenback against a basket of 6 major currencies, stood at 95 , 70 against 95.10 at the close of last week.
The catalyst was a rise in consumer price inflation in the United States in June to 0.9% from 0.6% previously, beating analysts’ expectations by 0.4%. Yields on US Treasury bonds ended lower. The benchmark US 10-year bond yield closed at 1.29% on Friday, up from 1.36% last week.
The week was also marked by interest rate decisions by the Reserve Bank of New Zealand and the Bank of Canada. The RBNZ announced it was ending its bond buying program effective July 23 and signaled a shift towards a rate hike. Which was unexpected and saw a big move in the NZD / USD and NZD / AUD.
The NZD against AUD at 0.9459 rose 1.6% above its 90 day average, in the 0.9231-0.9459 range.NZD / AUD
In contrast, the BOC, as was widely anticipated, lowered the target for its weekly bond purchase and left its interest rate unchanged. The US dollar fell to its highs after Fed Chairman Jerome Powell stressed that monetary policy would continue to provide strong support to the economy.
Infections from a third wave of the contagious Covid-19 Delta variant continued to climb around the world. Which led to a safe haven for the US dollar.
Interest rate trends last week
USD / JPY – Had a choppy trading week, peaking at 110.70 as well as low at 109.71. The greenback closed on Friday at 110.08, surprisingly little changed from last week’s close at 110.12. The main driver of this currency pair has been the appetite for risk. Breaking with tradition, the USD / JPY traded independently of the yield on US 10-year bonds last week.
EUR / USD – The Euro, unlike the Japanese Yen, had a more subdued trading week. The shared currency ended the week lower, settling at 1.1805 (1.1877 last Friday). The euro’s overall range was between 1.1772 and 1.1881. There were no major events or data from the Eurozone last week. EUR / USD was based on the US dollar.
AUD / USD – The Australian dollar ended lower against the greenback and experienced volatile sessions during the week. AUD / USD slipped to close lower on Friday at 0.7399 (0.7492 last Friday). The weekly range for the Aussie Battler was 0.7386 (low) and 0.7496 (high). An increase in the delta variant of Covid 19 cases in Sydney and Melbourne has seen both cities locked down, affecting 10 million people.
GBP / USD – The British pound has been heavily impacted against the US dollar due to mostly weaker economic data released last week. The UK’s producer price index (PPI) for inputs and outputs fell and missed estimates. The overall stronger US dollar also weighed on the British currency. GBP / USD fell more than 1% to close at 1.3765 from 1.3902 last week. The weekly low / high was 1.3738-1.3910.
USD / CAD – Another victim of the widespread strength of the US dollar has been the Canadian loonie. The greenback climbed to 1.2615 on Friday, from 1.2445 a week ago. While the Bank of Canada lowered the target for its weekly bond purchases, this was widely anticipated by the markets. USD / CAD hit a weekly low at 1.2424 and a high at 1.2620.
NZD / USD – The Kiwi, which is a flightless bird endemic to New Zealand, also the forex market name given to the NZD / USD pair, has had a roller coaster week. RBNZ surprised markets mid-week by announcing that it would end its bond buying program on July 23 and signaled a shift towards a rate hike. This saw the Kiwi hit a weekly high at 0.7044 after hitting a low of 0.6939 on the day the RBNZ announced. The NZD / USD closed at 0.6983 on Friday (0.7002 last Friday).
USD / CHF – Ended the week at 0.9178, higher than last week’s close at 0.9140. The dollar hit a weekly high of 0.9200 against the Swiss franc on Wednesday. The week’s low for USD / CHF was 0.9117 which was hit on Friday. The Swiss franc, like all major currencies, was weaker due to the widespread strength of the US dollar.
USD / SGD – Against the Singapore dollar, the greenback climbed higher to finish at 1.3575 on Friday (1.3510 last Friday). USD / SGD hit its weekly high at 1.3578 on the same day. The week’s low for USD / SGD was 1.3493. The greenback also gained ground against all Asian, emerging and Asian currencies last week.
USD / THB – The US dollar hit a one-week high at 32.70, which was last seen in mid-April. USD / THB closed at 32.67 on Friday, up from 32.52 last week. The greenback’s weekly low against the Thai baht was 32.39. Covid-19 infections in Thailand have increased, with more than 10,000 people per day in the past two days.
USD / PHP – the Philippine peso has weakened against the generalized and stronger US dollar overall. Philippine Vice President Leni Robredo has made an urgent call for accelerated vaccinations amid an increase in the delta strain of coronavirus cases. USD / PHP ended the week at 50.55, up from 50.25 last week. The weekly traded high was 50.69 while the recorded low was 50.07. Both extremes were hit in choppy trading on Wednesday.
EUR / JPY – The EUR / JPY cross settled at 129.97 at the end of trading in New York on Friday. A week ago, the euro closed at 130.80 Japanese yen. The weekly EUR / JPY range was between 129.61 (Thursday) and 131.09 (Wednesday). USD / JPY movements were the driving force behind this crossover.
EUR / GBP – closed Friday in New York at 0.8577 (0.8545 closed a week ago). EUR / GBP hit a weekly high at 0.8597 a week ago. The weekly low traded was 0.8503 on Thursday after weaker than expected UK PPI entry and exit data was released. EUR / GBP steadily climbed to its 0.8577 level on Friday.
GBP / JPY – Against the yen, the British pound ended the week at 151.60, below its close of 153.12 last Friday. The GBP / JPY cross hit a weekly high at 153.48 (Wednesday). The low for the GBP / JPY was seen on Friday at 151.60, following the release of weaker-than-expected UK PPI figures on Thursday.
AUD / JPY – ended the week lower, weighed down by the fall in AUD / USD. The Aussie Battler closed at 81.42 on Friday, down from 82.50 a week ago. The week high traded was 82.82 (Wednesday) while the week low was 81.10 which was reached on Friday. Chinese data released last week greatly exceeded expectations. It is the fight to contain the increase in Covid-19 cases in Sydney and Melbourne that has weighed on the Australian.
EUR / AUD – The Euro appreciated against the Aussie last week, ending at 1.5960 from 1.5852 last week. The weekly high for this currency pair was at 1.5975, which was reached last Friday. The lowest recorded was 1.5775 on Thursday.
GBP / AUD – stood at 1.8612 on Friday when trading in New York closed. The GBP / AUD close in New York last week was at 1.8560. The weekly traded high was 1.8651 (Friday) while the low was seen a week ago at 1.8471.
AUD / NZD – The Aussie closed lower at 1.0562 on Friday from 1.0704 at the close of last Friday. AUD / NZD hit a weekly high at 1.0740 on Wednesday before falling for the remainder of the week. The Australian dollar hit a low against the kiwi at 1.0546 (Friday). A hawkish trend from the RBNZ contrasted with the conciliatory trend from the RBZ which weighed on the AUD / NZD pair.
Please note that the opinions of our authors are their own and do not reflect the opinion of Best Exchange Rates and should not be taken as a reference to buy or sell any financial product.