The monthly Broad Index value of the US $ at the end of November was higher than at any time since April 2002, Figure 1. The daily index as of December 30th appreciated by 4.0% in the last three months of 2016 and by 1.4% in the month of December, driven by the Fed’s increase in its target short-term interest rate on the 14th of December to 50 – 75 basis points.
Table 1 shows the value of the US $ measured in the currencies of 16 steel and iron ore trading nations on December 26th, it reports the changes in one year, three months, one month and seven days for each currency and is color coded to indicate strengthening of the dollar in red and weakening in green. We regard strengthening of the US Dollar as negative and weakening as positive because the effect on net imports. At the three month level the dollar has strengthened against all sixteen currencies except Russia which is still on the rebound from the very severe decline in January of this year. At the one month level the dollar strengthened against 10 of the 16 and at the seven day level strengthened against seven. This trend seems to indicate that traders think the party is over for the moment and they will take a breather before the run up to the next Fed meeting in April. In each of these reports we comment on a few of the 16 steel trading currencies listed in Table 1.
The Mexican Peso Two days after the US election the peso broke through the 20 / US $ level for the first time ever and bottomed out at 20.73 on December 2nd. Since then the peso has been trading in a range and required 20.58 units to purchase one US $ on December 26th, (Figure 2). The Peso has declined by 16.2% in one year and by 3.96% in the last three months. On January 1st 1994, when the NAFTA was initiated it took only 3.5 pesos to buy one US dollar.
The Turkish Lira fell through 3.5 / US $ on December 2nd and closed at 3.5066 on December 26th being down by 14.9% in three months and by 1.8% in the last month. Figure 3 shows the Lira to have been in free fall since mid-November.
The Euro The Euro has declined by 6.9% in the last three months and on December 26th was worth 1.0460 US dollars. Parity is on the horizon, (Figure 4).