Dollar Down Today but Stronger Than a Week Ago – Currency Thoughts
Dollar Down Today but Stronger Than a Week Ago
May 9, 2025
In a week that saw the Federal Reserve hold its ground on interest rates and express confidence in the current policy stance, investors were also heartened by some progress in tariff talks that lessened anxiety about a spiraling trade war.
The Federal Reserve was but one central bank to review monetary policy during the week. The last other examples come from Peru and Serbia:
The Central Reserve Bank of Peru‘s Board of Directors cut their interest rate by another 25 basis points to 4.5%, three percentage points below the peak of 7.5% that had prevailed from January 2023 until an initial cut in September of that year. In making its latest easing, a released statement notes that “the interest rate is approaching the level estimated as neutral. Future reference rate adjustments will be conditional on new information about inflation and its determinants.” Inflation is running a tad under 2.0%, and “one-year-ahead inflation expectations remained at 2.3 percent in April.”
The National Bank of Serbia‘s policy rate has been at 5.75% since a trio of 25-basis point cuts last June through September. Their statement out today notes that
Though inflation retreated significantly and is moving within target bounds, a cautious momentary policy should still be pursued. Inflation at home greatly depends on developments in global commodity and financial markets which are currently highly volatile amid uncertainty related to trade policies of leading global economies. Estimates prevail that, in such circumstances, global inflation will probably recede at a slightly slower-than-expected pace, while economic growth will be subdued due to disruptions in trade flows, production chains and weakness in key drivers of growth such as foreign trade, investment and consumption.
In overnight financial market trading, the dollar eased back 0.6% against the euro and yen, lost 0.5% relative to the Korean won, and dropped 0.4% versus the Australian dollar and sterling. Prices for oil and gold are 0.8% and 1.1% higher. Bitcoin, now above $103,000, has reestablished a beachhead above the $100k threshold, versus a $75,000 quote just a month ago.
Ten-year sovereign debt yields dipped one basis point in the U.S. case but otherwise show increases today so far of four basis points in Italy, Spain and Japan and three bps in Germany, France and the U.K.
Share prices climbed 1.8% today in Taiwan and 1.6% in Japan. Markets are up 0.8% in France and Germany and 1.2% in Italy.
Among released economic data this Friday, household spending in Japan outperformed expectations in March, rising 0.4% on month and 2.1% on year. But real average cash earnings were 2.1% below a year earlier, and the leading and coincident economic indicators dropped to four-month lows.
China’s trade surplus in April of $96.2 billion exceeded expectations by over 10%, bringing the year-to-date surplus to $369 billion compared to $236 billion a year earlier. The first-quarter Chinese current account surplus of $166 billion was roughly 3.5 times wider than a year earlier.
Canada’s jobless rate of 6.9% last month was its highest in 43 months, while wage growth of 3.5% year-on-year was little changed.
Consumer price inflation in Norway slowed to a 3-month low of 2.5% last month, and PPI inflation of 2.1% was at a 5-month low. Lithuanian CPI inflation matched a 7-month high set in March but, at 4.1%, was well down from the peak of 24.1% in September 2022. Brazilian CPI inflation of 3.5% was the most in 26 months.
With war still raging in Ukraine, consumer price inflation there swelled further to a 23-month high of 15.1% in April versus 3.2% a year earlier.
Consumer confidence weakened to a 14-month low in Switzerland but in Indonesia bounced 0.6 index points above a 5-month low set in March.
Copyright 2025, Larry Greenberg. All rights reserved. No secondary distribution without express permission.
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