The green currency plunged for the whole of last week on lackluster US economic data. The unimpressive US economic data cast further doubts among investors about the possibility of the Fed scaling back its asset purchase policy, as early as next month. Also, the Yen and Euro soared to their peaks, casting further downward pressure on the greenback.

Initially, on Tuesday last week, the US Dollar pared back its previous losses, as it edged up against the Yen to 98.14 Yen from a low of 97.82 Yen. The US Dollar also hit a high of $1.3245 against the Euro and later settled down around $1.3290. The US Dollar also climbed against the Pound as the USD/GBP pair hit a bottom of $1.5330.

But, later on Wednesday, the US Dollar started its downtrend, as it slipped against the Yen to 97.00 Yen, with a low of 96.76 Yen. Due to a strengthening Yen, the Euro/JPY pair too plummeted to 129.67 Yen, it’s lowest in four weeks. On Thursday, the Dollar index declined to 81.01, it’s lowest since June 19. Reflecting this trend, the US Dollar dropped against the Yen to a seven-week low of 95.79 Yen. Consequently, the Euro advanced by 0.5% to $1.3394, its seven-week high against the US Dollar.

The positive economic data indicating a reduction in the US trade deficit caused the US Dollar to climb briefly on Tuesday. The US trade deficit surprisingly narrowed to $34.2 billion in June beating the forecasts for a $43.5 billion deficit. But, later on, good performance in the Eurozone pushed down the Dollar against Euro and other currencies. Germany, a major Eurozone economy, revealed that its manufacturing orders rose by 3.8% from previous month 0.5% decrease, displaying a faster recovery than expected.

Moreover, Italy’s economic contraction slowed down its pace, as it eased to 0.2% from a previous 0.6% shrink, less than the predicted 0.4% shrink in growth. Later the Euro further strengthened, as the German factory production increased by 2.4% in June, beating expectations of a mere 0.3% increase.

Furthermore, the Japanese stocks fell by 4% that drove up the Yen, as investors sought the safe haven currency amid market stress. Another big blow to greenback was the marginal increase in the US jobless claims released on Thursday. The jobless claims rose by 5000 to 333,000. All these factors caused the decline in the greenback.

On Friday weekend, the US dollar continued to decline as it slipped by 0.6% to 96.18 yen. The Australian Dollar that surged up by 1.3 % to $0.9118, further dragged down the US Dollar. But, staring this weekend on Monday, US Dollar pared back its losses, as it climbed against the Yen by 0.3% to 96.54 yen and by 0.1% against the Euro to $1.3325. This was reflected in the Dollar index that edged up by 0.1% to 81.234, as of 2:04 p.m.

Last weekend the rise in the Australian Dollar further brought down the greenback. China is Australia’s major importer for raw materials and so it greatly influences Australia’s economy. For July month, China’s exports rose by 5.1% against a prediction of 2%, while the imports jumped by 10.9% beating expectations of a 2% rise. This made US Dollar, a traditional hedge against economic risk, unattractive, as investors flocked to more profitable currencies.

However, on Monday this week, US Dollar got a reprieve from its week long downtrend, due to expectations of a positive US retail sales data. According to a Bloomberg News survey, US retail sales might show an increase by 0.3% in July, a positive signal for US economy.

Thus, the US Dollar after a weeklong plunge has started showing signs of a possible gain against other currencies. Japan’s recent GDP readings reveal a possible slowdown as the GDP grew only by 0.6% against expectations of 0.9% increase. This will tamp down the Yen, if the Nikkei Stock market does not post any further downfalls. So, with more positive data from US economy, the Dollar might possibly rally up in the coming days.

Note: This blog is just an expression of the author’s opinion and cannot be deemed responsible for any losses incurred.