(MENAFN- Kuwait News Agency (KUNA)) The US dollar surged against its major counterparts as the divergence between approaching tighter monetary policy in the US and looser policies in Europe, Japan, and Switzerland continues to widen, a National Bank of Kuwait (NBK) report has said.
In its latest meeting, the Fed acknowledged the improvement in the US labor market and noted that the economy is making progress toward its goals in inflation and employment, the report added on Sunday.
That combined with an upbeat jobless claims report pushed the US dollar to close the week higher. Additionally, the US dollar was lifted by the recent volatility stemming from the Russian financial crisis, which drove investors to seek safety in the greenback, noted.
The Federal Reserve said it will be patient on the timing of the first interest-rate increase since 2006, replacing a pledge to keep borrowing costs near zero for a "considerable time," and raised its assessment of the labor market, the report said.
Meanwhile, new-home construction in the US exceeded a 1 million annualized pace in November for a third consecutive month, continuing a slow recovery in the housing market. While housing starts declined 1.6 percent to a 1.03 million annualized rate, they retreated from a 1.05 million pace in October.
That was stronger than previously estimated, as per figures from the Commerce Department. Economists expected a 1.04 million rate. The last time starts exceeded 1 million for three months straight was in early 2008.
On the US consumer prices, the NBK report said they had recorded their biggest drop in nearly six years in November as gasoline prices tumbled, but did little to change views the Federal Reserve would start raising interest rates in mid-2015.
The Labor Department said on Wednesday its Consumer Price Index fell 0.3 percent, the largest decline since December 2008, after being flat in October.
The number of Americans filing new claims for unemployment benefits unexpectedly fell last week, suggesting the labor market continued to strengthen. Initial claims for state unemployment benefits declined by 6,000 to a seasonally adjusted 289,000 for the week ended December 13, the report stated.
As for Europe, the NBK said that the German business confidence rose for a second month in a sign that Europe's largest economy is overcoming the soft patch it hit earlier in the year.
The Ifo institute's business climate index, based on a survey of 7,000 executives, advanced to 105.5 in December from 104.7 in November, when it rose for the first time in seven months matching market expectations.
The Bundesbank has said the German economy is showing signs of strengthening after it effectively stagnated in the middle of the year and managed only a "modest start" to the fourth quarter.
According to the NBK report, the Swiss National Bank announced that it will impose negative interest rates on commercial bank deposits in a bid to stem a tide of money flowing from Russia's financial crisis.
Swiss National Bank President Thomas Jordan cited that the Russian turmoil as a "major contributory factor" for the surprise decision to introduce a charge of 0.25 percent on sight deposits, the cash-like holdings of commercial banks at the central bank.
On the UK, the report said that the Bank of England policy makers voted 7-2 to keep interest rates at a record low this month as the majority said a "promising" pickup in wage growth was not enough to raise concerns about the outlook for medium-term inflation.
The UK inflation slowed to the least in more than a decade in November as tumbling oil prices pushed down transport costs and food prices dropped. The rate of consumer-price growth dropped to 1 percent, the least since 2002, from 1.3 percent in October, the Office for National Statistics said in London on Sunday. Economists forecasted 1.2 percent.
Oil prices have fallen about 45 percent this year, pushing down energy costs across the world and helping to boost consumers' spending power, the report said.
In the meantime, the Bank of Japan maintained unprecedented stimulus, as Governor Haruhiko Kuroda's bid to stoke inflation faces increasing challenges from the tumble in oil prices, according to the NBK report.
It quoted a statement by the central bank as saying that it will boost the monetary base at an annual pace of 80 trillion Yen (USD 670 billion), as forecast by all 33 economists surveyed by Bloomberg News.
Japan's exports have shown signs of picking up, while production has started to bottom out, the BOJ said, striking a more upbeat tone in its view of the world's third-largest economy. Oil has lost more than a quarter of its value since the central bank boosted easing on Oct. 31 to end a "deflationary mindset." The economy is expected to continue a moderate recovery, as the effects of an April sales-tax increase dissipate, the BOJ said in a statement.
Inflation expectations appear to be rising from a longer-term perspective, the bank said. Last month, it said exports had been "more or less flat" and cited "some weakness" in production, the NBK report concluded.
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