FX Roundup: Dollar struggles following record overnight slide

The dollar continued lower against major global currency crosses on Thursday, in wake of a dovish stance taken by US Federal Reserve chair Janet Yellen earlier in the week and despite a rise in the Chicago Purchasing Managers’ Index for March.

At 1541 BST, the euro was up 0.41% versus the greenback changing hands at $1.1384, while the pound was broadly flat changing hands at $1.4377. The dollar also slipped 0.04% and 0.67% versus the yen and Swiss franc to change hands at JPY112.39 and CHF0.9585 respectively. Overnight, the dollar fell to its lowest level since June 30 against a basket of ten other currencies.

Earlier in the session, the Chicago PMI rose six points to 53.6 in March, led by sharp rebounds in production and employment. The data, released by the Institute for Supply Management, came in better than the 50 reading economists had expected.

The increase in the barometer was led by a big jump in production, which followed an even steeper decline in the previous month. The biggest surprise came from the employment component, however, which rose above the 50 mark in March to the highest level since April 2015 following a period of relative weakness compared with other activity indicators.

Kit Juckes, head of forex at Societe Generale, said, “The sun is threatening to come down on the dollar rally. Recent developments highlight closeness of the relationship between Fed policy, financial markets and the economic outlook.

“The Fed watches markets, markets watch the Fed, and the global economy is sensitive to both. The result, sentiment swings but the global economy grows slowly, while the Fed is easily scared and Yellen in this instance feels the need to remind us of her cautiousness.”

Meanwhile, commodity linked currency crosses also rose across the board with the Australian dollar up 0.16% against its US counterpart exchanging at US$0.7683. The New Zealand dollar rose 0.03% to change hands at US$0.6922. However, the greenback was broadly flat against the Canadian dollar exchanging at CAD$1.2969.

In Latin America, Argentina’s senate approved President Mauricio Macri’s repayment deal aimed at holdout creditors. The deal is likely to end the country's 15-year legal tussle with creditors in New York that has restricted Argentine access to international credit markets.

The holdout creditors, who refused to agree to a restructuring of Argentina's debt after it defaulted on nearly $100bn (£71bn) in 2001, can now be repaid. Central to the deal is a cash payment of $4.7bn; nearly 75% of what Argentina owes to funds that sued the country in a US court over non-payment of debt.

President Macri, elected last year on a promise to improve Argentina’s economic fortune, had warned senators that a "no" vote would condemn the country to remain a "financial pariah" shunned by global credit markets. Subsequently, the repayment deal was approved by 54 votes to 16 in the Senate after a 12-hour debate late on Wednesday.

Earlier this month, Argentina's lower house of Congress approved the debt deal after 20 hours of debate, with a majority of 165 to 86 lawmakers voting in favour of repealing bills which stood in the way of agreement with creditors.

Argentina now has until 14 April to pay the holdout creditors. A dollar was changing hands for 14.59 Argentine pesos in wake of the decision, having suffered a sharp devaluation after President Macri lifted currency controls in December 2015.

Elsewhere in South America, the dollar retreated against the Colombian (-0.23%), Chilean (-0.92%), Mexican (-0.09%) pesos and the Brazilian real (-1.50%).