Fed members’ views drive currency
The week starting August 10, 2015, hardly has any major data coming from the US side until Thursday, when retail sales and unemployment will be major drivers. With this absence of major data, the market was been moving on the basis of comments by Federal Reserve Vice Chairman Stanley Fischer and President of the Federal Reserve Bank of Atlanta Dennis Lockhart.
Fischer gave a slightly dovish statement. He stated that he was happy with the employment rates but that inflation was still a concern, as it’s not moving towards the medium-term target 2%. Lockhart, during his speech to the Atlanta Press Club, continued to claim that the economy is ready to handle a gradual rise in interest rate.
The US dollar index fell to 97.04 following the Fed members’ statements.
Yuan depreciation pushes the US dollar index up
The US Dollar index continued trading flat until the news of the PBOC (People’s Bank of China) devaluing the Yuan hit the markets. This triggered a bounce-back in the US dollar index, which eventually ended August 10, 2015, at 97.46. The PBOC reduced the daily reference rate of the Yuan by 1.86% in order to boost the economy after weak data in the previous week. This will be covered in a detailed manner, in part 3 of this series.
Impact on the market
The iShares MSCI China ETF (MCHI) reacted positively to the devaluation and rose by 2.29%, while ETFs related to neighboring countries were under pressure and the PowerShares India Portfolio ETF (PIN) fell by 0.36%. The S&P mining and oil ETFs, which had fallen last Friday, showed some bounce back with the SPDR S&P Oil & Gas Exploration & Production ETF (XOP) rising by 6.88%. The SPDR S&P Metals & Mining ETF (XME) also rose by 6.50%.
The top gainers for Monday included Marathon Petroleum Corporation (MPC), which rose by 4.02%, and Michael Kors Holdings Limited (KORS), which rose by 3.31%. Chinese American depository receipts (ADRs) posted losses. Alibaba Group Holding Limited (BABA) fell by 3.89%.