- The dollar index continued its winning streak for an eighth consecutive week.
- Investors eagerly await the August US Consumer Price Index reading.
- In August, Canada’s economy added 39,900 jobs, exceeding expectations.
Currency futures ended lower last week as the dollar index continued its winning streak for an eighth consecutive week.
Bloomberg dollar index (Source: Bloomberg)
This streak, the longest since 2014, came after recent data indicated the resilience of the US economy. The DXY remained almost unchanged at 105.08 for the day. Strong US economic data last week raised concerns among some investors, suggesting that even if the Federal Reserve decides not to change rates this month, they might stay high longer than expected.
Investors eagerly await the August US Consumer Price Index reading, scheduled for Wednesday, especially with the rising oil prices.
This increase in the dollar’s value has also led to heightened concerns among Japanese policymakers, who are uncomfortable with the yen’s decline.
Masato Kanda, Japan’s top currency diplomat, stated that authorities are considering all options to counter “speculative” currency movements. At the same time, Hirokazu Matsuno, the chief cabinet secretary, emphasized the government’s vigilance.
Meanwhile, the Canadian dollar gained strength against the US dollar on Friday, thanks to stronger-than-expected domestic job data. This development revived the possibility of another rate hike by the Bank of Canada, which had previously adopted a wait-and-see approach earlier in the week. Nevertheless, the Canadian dollar ended the week down by 0.2%, a day after touching a five-month low at 1.3694.
In August, Canada’s economy added 39,900 jobs, exceeding expectations for a gain of 15,000, while the unemployment rate remained steady at 5.5%. This indicates underlying economic strength despite the prevailing high-interest rates.
Money markets now see a 44% probability of another rate hike by the Bank of Canada by year-end, up from the previous estimate of 36% before the data release. On Wednesday, the central bank decided to maintain its benchmark rate at a 22-year high of 5%, citing weaker economic growth.
Finally, the pound remained slightly above a three-month low and was on track for a 0.9% weekly decline. This decline was prompted by employment data indicating a British job market slowdown. The pound’s slide, approximately 5% against the US dollar since mid-July, can be attributed to both the signs of a weaker job market in Britain and a substantial rally in the dollar’s value.
