On December 31st the Dow Jones Index of shares dropped 0.9 percent and the Standard & Poor’s Index fell 1 percent. Oil weakened on Wednesday to a 5 ½ year low and ended with their second biggest annual drop ever, down by half since June under pressure from a global glut of crude. Today U.S. crude climbed to 54.40 USD a barrel.
Based on speculation the Bank of Japan will continue unprecedented stimulus measures, the JPY remained lower versus the USD and tumbled for a third straight year. Japan’s currency declined 0.1 percent to 119.87 versus the USD and the EUR/JPY traded at 144.86. The USD held gains versus 16 major peers before a report by Market Economics will be released today. Economists estimated that this report will show that a U.S. manufacturing index climbed to 54 coming from 53.7. The EUR started the new year at 29-month lows after European Central Bank President Mario Draghi fanned expectations it would take bolder steps on stimulus this month, which underlined the USD’s rate advantage. It is estimated that the Federeal Reserve will increase interest rates this year. Mario Draghi said in an interview that the central bank stood ready to respond to the risk of deflation. The ECB council is going to meet on January 22nd and markets are wagering it will finally decide to start buying sovereign debt, following in the footstep of the U.S., UK and Japan. The EUR tumbled 0.2 percent to 1.2080 USD.
New Zealand’s currency decreased after a Chinese manufacturing gauge slipped to the lowest level in 18 months.The Purchasing Managers’ Index dropped to 50.1 in December from 50.3 in November showing the second-largest economy set to start the new year on a weak note. The NZD/USD was at 0.7760 and the AUD/USD traded at 0.8130.
Read the full report: FX Daily