Wednesday, 09 Oct, 2024
By: Anshul Vipat
The news brought cheer for the Indian markets, as well. The rupee finished at 80.79 at the end of the week, after jumping 2 percent in the previous week, its biggest weekly gain in last four years. Image source: IANS
The dollar has been the king this year. The US Dollar Index, which measures the performance of the US currency against a basket of others, was up 16 percent from the beginning of the year through the start of November
The cooling off of US inflation rates showed its effect on its currency as the dollar registered its biggest two-day drop in almost 14 years. Against a basket of currencies, the dollar was down about 3.8 percent over two sessions, on pace for its largest two-day percentage loss since March 2009. Last week's dollar weakened after latest data showed US consumer inflation rose 7.7 percent year-on-year in October, its slowest rate since January and below forecasts for 8 percent.
The US inflation rate grew at an annual pace of 7.7 percent in October, declining from 8.2 percent in September and lower than estimation of 8 percent. This sparked speculations that the Fed would go easy on monetary tightening.
Early November, US Federal Reserve had raised interest rates by 0.75 percentage points to battle inflation. The cumulative increase in interest rate by the US Fed is 350 basis points or 3.5 percent since April 2022. To sum up the economic slump in US, the interest rate in the country was almost zero at the start of the year.
How global currencies performed against US dollar this week
The dollar was 1.7 percent lower against the Japanese YEN at 138.55 YEN while the Euro advanced 1.46 percent against the US. unit to $1.036. The Japanese YEN at one point climbed to its biggest single-day rise since 2015 and the British POUND notched its biggest daily advance since 2008. The risk-sensitive Australian and New Zealand Dollars advanced 1.4 percent and 1.6 percent, respectively, against the US dollar. The dollar was 2.4 percent lower against the Swiss FRANC at 0.94025 Francs.
The news brought cheer for the Indian markets, as well. The rupee finished at 80.79 at the end of the week, after jumping 2 percent in the previous week, its biggest weekly gain in last four years.
Dollar surge in 2022 weakened other currencies
The dollar has been the king this year. The US Dollar Index, which measures the performance of the US currency against a basket of others, was up 16 percent from the beginning of the year through the start of November.
That performance put the dollar on more even ground with the euro, which achieved parity with the greenback at least twice this year. The Japanese yen, in September, fell to its lowest levels versus the dollar in 24 years. Others like the South Korean Won declined by 17 percent, while the pound sterling is down 16 percent. The Indonesian Rupiah (down 8 percent), Philippines peso (down 13.6 percent), Singapore's dollar (down 5.4 percent) also registered a decline. The US dollar is currently at its highest level since 2000, despite the fall in the past two days.
The Indian currency has also been on a decline by almost 9 percent since early this year. It hit a record low of Rs 80/per US dollar in late July and since then has been trading in 78-84 mark. Just last week, the rupee had plunged to its lowest ever rate of 84 rupees.
This shows how interconnected the global economy is, and how a slowdown in any large economy hurts the developing and poorer countries most. Last week, India Tracker had analysed how increasing federal rates would impact investments in Indian markets in turn putting the Indian rupee under pressure.
