The two top performers both benefited from news that was positive for interest rates. For the Norwegian krone it was inflation, which unexpectedly rose from 3.0 per cent to 3.2 per cent. Investors saw it as putting upward pressure on the Norges Bank's key policy rate, which has been steady at 1.5 per cent since March last year. For the NZ dollar it was the Reserve Bank of New Zealand's policy statement, which signalled an interest rate increase in the new year.
At the bottom of the pile was the US dollar. The angle there was also interest rates, in this case a fading expectation that the Federal Reserve will bring an early end to its $85bn-a-month quantitative easing programme. Although the dollar's decline was a week-long affair, it took a specific hit from weaker-than-expected retail sales and consumer confidence data on Friday.
Another cause for concern was the withdrawal of Larry Summers's candidacy for the Fed chairmanship. It opens the door to the selection of Janet Yellen, who investors fear will be more inclined to extend the QE programme.
Sterling's above-average performance came about mainly as the result of unexpected falls in the rate of unemployment, to 7.7 per cent, and the number of jobseekers. The news stoked anticipation of unemployment falling further to 7.0 per cent, at which point investors believe (perhaps unrealistically) the Bank of England will begin to ramp up interest rates.
The week's unluckiest currency was the Australian dollar. Until Thursday morning it was looking as though the Aussie had turned a corner after six months of relentless decline. While that may still be the case, the unexpected loss of nearly 11,000 jobs in August and the uptick in the unemployment rate to 5.8 per cent reminded investors that the domestic economy is still not on peak form.
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