Dollar Index Fell Last Week Amidst Tariff, Geopolitical Turbulence

The U.S. dollar dropped against major currencies during the week ended February 27 in the aftermath of the tariff turmoil following the U.S. Supreme court’s verdict. The week was also marked by lingering U.S.-Iran tensions, President Trump’s State of the Union address as well as an uptick in producer price inflation and private hiring that triggered hawkish expectations from the Federal Reserve, limiting the Dollar’s slide.

However, a dramatic escalation in the U.S.-Iran conflict over the weekend has lifted the six-currency Dollar Index close to a five-week high on Monday. Here is a quick recap of the dollar’s trajectory during the week ended February 27.

During last week, the U.S. dollar inter alia lost against the euro, the British pound, the Australian dollar, the Canadian dollar, the Swedish krona as well as the Swiss franc. The greenback however held ground against the Japanese yen that nursed weekly losses amidst skepticism surrounding the next rate hike by Bank of Japan. As a result, the Dollar Index which measures the Dollar’s strength against a basket of 6 currencies dropped close to 0.20 percent on a weekly basis.

Data released on Tuesday by ADP Research Institute showed U.S. private employers adding an average of 12,750 jobs per week in the four weeks ending February 7, up from a revised 11,500 in the previous period.

Data released by the U.S. Bureau of Labor Statistics on Friday showed producer prices increasing 0.5 percent month-on-month in January versus a rise of 0.4 percent in December and market forecasts of 0.3 percent.

During the past week, the Dollar Index traded between the weekly low of 97.36 recorded on Monday to the weekly high of 98.00 recorded on Wednesday. The index eventually closed the week’s trading at 97.61, implying a decline of 0.19 percent from the level of 97.80 on February 20.

Amidst the dollar’s weakness, the EUR/USD pair rallied 0.27 percent during the week ended February 27. From the weekly high of 1.1836 touched on Monday, the pair slipped to a low of 1.1766 on Tuesday. The pair eventually closed the week at 1.1814, versus 1.1782 a week earlier.

The British pound edged up against the greenback during the week ended February 27. The GBP/USD pair which had closed at 1.3484 on February 20 closed trading for the week ended February 27 at 1.3486. The weekly trading range was wider, between a high of 1.3577 recorded on Thursday and a low of 1.3438 recorded on Friday.

The Australian Dollar jumped 0.45 percent against the U.S. Dollar during the past week, amidst a hawkish outlook for the Reserve Bank of Australia. The AUD/USD pair rallied from the level of 0.7084 recorded on February 20 to close the week ended February 27 at 0.7116. During the week, the pair oscillated between a low of 0.7026 recorded on Tuesday and the high of 0.7141 recorded on Thursday.

Data released on Tuesday had showed Australia’s annual inflation unexpectedly steady at 3.8 percent in January. The reading surpassed market forecasts of 3.7 percent and remained outside the central bank’s 2-3 percent target.

The U.S. Dollar however rallied against the Japanese Yen during the week ended February 27 amidst a decline in the core inflation readings in the Tokyo CPI update. The USD/JPY pair closed the week at 156.06 versus 155.07 a week earlier, registering a gain of 0.64 percent. During the week, the pair oscillated between the low of 153.99 recorded on Monday and the high of 156.83 on Wednesday.

Haven bids after the U.S. and Israeli strikes on Iran has lifted the six-currency Dollar Index to a high of 98.57 on Monday. The surge in crude oil prices in the aftermath of the strikes has also sobered expectations of rate cuts by the Federal Reserve, boosting the greenback. It is currently trading at 98.21, implying a jump of 0.62 percent from Friday’s closing level of 97.61.

The EUR/USD pair is currently 0.85 percent lower at 1.1714 versus 1.1814 on Friday. The GBP/USD pair is currently trading near 1.3408 versus 1.3486 on Friday, implying a decline of 0.58 percent. The AUD/USD pair is currently trading 0.63 percent lower at 0.7071 versus 0.7116 on Friday. Amidst the dollar’s strength, the USD/JPY pair is now 0.74 percent higher at 157.22 as compared with the level of 156.06 recorded at the end of the previous week.

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