USD Exchange Rate Report
Week of January 30 – February 3, 2023
By Luke Brown, Quinnipiac Global Economics Research Team
Editing and Final Comment by Chris Ball
Currencies Index
Source: Yahoo Finance and own calculations. Exchange rates are inverted to be USD per local currency (i.e., an increase indicates a stronger domestic currency) and then indexed to be 100 at the start of the period.
For the week of January 30 – February 3, 2023, there was a continuing trend of mixed results after all currencies saw an initial weakening at the start of the week. The British pound (green) saw the steepest decline, ending the week down just below 1.5%. The Australian dollar (gray) also finished the week down 0.5% after some fluctuations late in the week. The Canadian dollar (red) and the euro (blue) finished the week essentially unchanged with EUR increasing only about 0.2%. The Japanese yen (maroon) and the Swiss franc (yellow) both strengthened approximately 0.6% and 0.5%, respectively.
Historical Trends
Source: Yahoo Finance and own calculations. Exchange rates are inverted to be USD per local currency (i.e., an increase indicates a stronger domestic currency. The center line is a rolling three-month average. The upper and lower boundaries are the average plus and average minus one standard deviation, respectively, for the same three-month period.
For the week of January 30 – February 3, 2023, there seemed to be some trend reversals occurring. The British pound (GBP) saw a steep weakening this week after consistently featuring an upward trend. While the Australian dollar (AUD) remains one standard deviation above its three-month rolling average, it also saw a reversal this week relative to its previous strengthening. The Canadian dollar (CAD) and the euro (EUR) remained nearly unchanged remaining near their upper bounds. These currencies saw a quick strengthening on February 2 that was quickly washed away, but is shown in each of the graphs with a small peak. The Japanese yen (JPY) and Swiss franc (CHF) both strengthened this week remaining one standard deviation above their three-month rolling averages.
Chris Comment
The uptick in the Euro (EUR) on February 2nd – most easily seen in the Index Graph – is not a surprise. At the ECB’s press conference on February 2nd, they announced an increase in Euro area interest rates. While the US Fed raised rates as well last week, the US has been slowing the rate of its rate hikes while the ECB is still in full rate-hike swing. All else equal, that should strengthen the Euro relative to the USD (i.e., raise EUR in these graphs).
The British pound (GBP) is more concerning and something to watch. The Bank of England also raised rates on February 2nd. There is an uptick on that day in the Index, but all currencies displayed an uptick that day. The GBP has otherwise been declining relative to the USD. This is a trend to watch.
Finally, the Swiss franc’s (CHF) strengthening is unexpected since the Swiss Central Bank has not change rates recently. But the Japanese yen (JPY) and Australian dollar (AUD) also strengthened on February 2nd and their banks didn’t change rates either. My guess is that, rather than reading more into any of these currencies’ specific movements, it looks more to me like the strong ECB rate hike combined with a slowing US rate of increase is showing up as a general weakening of the USD right now and that was reflected in all major currency markets this past week.
*Special Thanks to Jack French for the coding template and to Luke Brown for his coding and writing on this report.