USD: Currency Index & Volatility

Relative Currency Strength

The period’s key driver for the dollar were the FOMC minutes, whose release broke the steady strength of the Greenback’s index. The gauge started the week by rising above the baseline and held among the strongest gauges in the first half of the period, but turned North on Wednesday, when the Fed’s meeting minutes offered no additional information on the long-awaited rate hike. The dollar’s slip extended well into Thursday, and from there the index barely managed to stabilize on the baseline by the end of the period. Nevertheless, the gauge opened the new week 0.2% above the reference level, thus posting the second-highest weekly growth.

The period was fairly smooth for the observed indexes, as most of them did not sway farther than +/-0.5% from the baseline. A notable exception was the Aussie’s gauge that rallied throughout the second half of the week and posted a 2% growth over its Monday value. Another rally was coined by the Kiwi’s index, as both Pacific currencies seemed to have benefited from the Greenback’s post-FOMC feebleness. Meanwhile, the franc’s gauge posted the greatest loss after spending the whole week on a downtrend.

Volatility

Even against the background of several tranquil weeks, volatility on the market remained extremely subdued, with both the Greenback’s and the aggregate measures holding below the two-week means for 90% of time. Moreover, elevated volatility portions of all observed currencies did not exceed the 15% level, and the spikes of the indexes did not reach even 2.0 points. The Aussie looked the most tranquil, put against the background of several relatively turbulent weeks, and reached only 6% of overturbulence.

The market volatility measure started the period with the week’s high of 1.27, as New Zealand’s retail sales and Japan’s preliminary GDP releases significantly influenced the domestic currencies in early Asian session. A few hours later one more notable spike of market volatility was provoked by the Kiwi’s drop, so Monday became one of the most turbulent days during the week. Later no economic release could change the tranquil state of the market until Thursday. Slight market activity increase was observed after the BoJ monetary policy report was published, and a similar volatility spike followed disappointing UK retail sales, but the two-peaked surge of the dollar’s index amid the afternoon releases of Philadelphia Fed manufacturing survey and CB leading indicator became the culmination of the day. The last week’s day was not marked by any influential news, but the USD volatility gauge reached tits high of 1.39.

Currency Significance

Continuing the movement of the previous week, the US dollar’s correlation composite started the week with a decline, and reduced to the minimum value of the period by Monday evening. On Tuesday, however, the aggregate showed a dynamic growth and reached the 0.55 level, gaining more than 0.25 points. On Wednesday and Thursday, the turbulence of the measure was caused by the US FOMC minutes, and the composite ranged from 0.49 to 0.55. Afterwards, the dollar’s final post-FOMC drop pushed the measure up, and it reached the maximum value of the week. The aggregate held at this level till Friday noon, when it started to decline to eventually finish the period slightly below its weekly average.

After the previous week’s lowering, the Greenback’s significance measure showed an upward trend. The composite was fluctuating in a range between 0.21 and 0.65, but its average gained only 0.01 points over the previous period’s reading. Most of the USD/EUR components also showed a slight increase. The most notable rise was observed in the pair’s bonds with the USD/AUD and USD/NZD, which gained 0.12 and 0.07 points, respectively. The average value of the component with USD/GBP, in turn, has lost 0.07 and 0.04 points compared with the short-term and long-term values.

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