FX Roundup: Currency crosses mixed as US ISM services index drops

The forex market failed to record dominant movements in favour of any major currency on Monday, as most global crosses began the week’s trading with mixed fortunes.

At 1504 BST, the euro was up 0.04% against the greenback, changing hands at €1.1221, as the US services sector saw its slowest growth last month since June, according to the Institute for Supply Management. However, the dollar rose 0.26% against the yen to JPY120.22.

The ISM’s services index declined from 59.0 in August to 56.9 last month, falling below the 57.5 reading analysts had expected. Last week, a report on non-farm payrolls showed 142,000 jobs were added in September, comfortably below the 201,000 reading analysts had estimated.

Each set of lacklustre US data is seen to be reducing the likelihood of an interest rate hike this year. Kit Juckes, head of forex of Societe Generale, noted: “The market verdict since mid-day Friday is pretty clear as the dollar and yen have fallen while emerging market and high-beta G10 currencies have bounced.

“But is that the right response in a world lacking an alternative growth engine if the US does slow? I can't see a lasting rebound in emerging market and commodity FX until we have more clarity on the Chinese economic outlook and crucially, on China's currency policy.”

Nonetheless, in late afternoon trading in Europe, the dollar traded lower against major EM currencies including the Brazilian real (down 0.41%), Singapore dollar (down 0.66%), Taiwan dollar (down 0.93%), Malaysian ringgit (down 1.04%) and the Indonesian rupiah (down 0.98%)

Selected commodities-linked currencies also got respite, with the dollar falling 0.38% against the Canadian dollar to change hands at CAD$1.3102. The New Zealand dollar rose 1.04% against the greenback to change hands at US$0.6498, while the Australian dollar rose 0.37% changing hands at US$0.7071.

Meanwhile, with the Bank of England’s Monetary Policy Committee meeting due on Thursday, the pound was 0.07% lower against the dollar at the start of the week exchanging at $1.5175. FXTM chief market analyst Jameel Ahmad said, “USD weakness is providing further encouragement to GBP/USD investors that the pair found a probable “bottom” around the 1.51 area seen last week.

“Further USD weakness would provide inspiration for the GBP/USD to continue trading higher, but it is important to make aware that another risk-off trading attitude from investors could result in the GBP/USD suffering another sudden shift in momentum.”