Dollar Falls as Investors Continue to Bet on Strong Global Recovery

The U.S. Dollar settled lower last week against a basket of major currencies for the fifth straight week as investors continued to bet that a global recovery would outpace U.S. growth.

March U.S. Dollar Index futures settled the week at 90.37, down 0.365 or -0.40%.

After hitting its lowest level in three years on Monday, the dollar sat in a small range amid concerns over a possible government shutdown this week-end. Monday was a U.S. bank holiday and there were only a few major economic reports. The minor reports were mixed.

Disappointing investors last week were the Empire State Manufacturing Index, U.S. Housing Starts, the Philly Fed Manufacturing Index and Preliminary University of Michigan Consumer Sentiment.

Helping to support the dollar were Capacity Utilization, Industrial Production, Building Permits, Weekly Unemployment Claims and the Fed Beige Book.

The Fed Beige Book showed the U.S. economy and inflation expanded at a modest-to-moderate pace from late November through the end of 2017, while wages continued to push higher.

“Most districts said that wages increased at a modest pace,” the U.S. central bank said in its periodic Beige Book report on the economy. “A few districts observed that firms were raising wages in a broader range of industries and positions since the previous report.”

“Firms in some districts noted an ability to increase selling prices. Retailers in some districts reported modest price increases and there were reports of rising home prices across the country,” the Fed said.

AUD/USD

Demand for higher risk assets, firm commodity prices and stronger-than-expected employment data helped drive the Australian Dollar to its highest level since September 20.

The AUD/USD finished the week at .7982, up 0.0071 or +0.90%.

Australia’s Employment Change report came in better-than-expected. Australia’s economy created 34,700 new jobs during December, according to Australian Bureau of Statistics data, which was well-above the economist consensus of 13,200 new jobs. The Australian unemployment rate rose from 5.4% to 5.5%, although traders said this was nothing to be concerned about.

USD/JPY

The Dollar/Yen hit a four-month low on January 17 before rebounding late in the week. However, the Forex pair still managed to post a loss for the second straight week.

The USD/JPY settled the week at 110.801, down 0.196 or -0.18%.

Early in the week, Bank of Japan Governor Haruhiko Kuroda offered a positive view on the economy and inflation on January 15.

Kuroda said in a speech to BOJ regional branch managers that core consumer inflation was “moving around 1 percent,” a slight change from three months ago when he said core consumer prices were around zero.

“The economy is expected to continue expanding moderately,” he added, reiterating his optimism on prospects for a sustained recovery.