FX Roundup: Dollar, pound correct on euro recovery

The dollar and pound lost momentum on Tuesday, as Chinese exports fell for the fifth successive month.

According to data published overnight, China's exports fell 6.8%, a sharper drop than expected, while imports were down 8.7%, slightly better than consensus calling for an 11.8% decline. The overall trade surplus came in at 343 billion yuan or $53bn.

At 1540 GMT, the dollar fell against the yen by 0.41% changing hands at JPY122.86. Concurrently, the pound fell 0.39% against the dollar exchanging at $1.4997, but the euro rose 0.43% to change hands at $1.0884, inching away from parity against the greenback.

James Hughes, chief market analyst at GKFX, said, “Chinese export numbers fell sharply to post -6.8% instead of the -5% that was expected. This has spooked the market a little but nowhere near as much as negative China data would have done prior to us being a little more certain about the US Federal Reserve's next decision.”

Continuing with major crosses, the greenback fell 0.65% against the Swiss franc exchanging at CHF0.9936, slipping below parity in the dollar’s favour during late European trading. Meanwhile, the pound corrected against the euro fetching €1.37730 down 0.86%, following on from the European Central Bank meeting last week.

Jane Foley, senior FX analyst at Rabobank, said, “Since the start of the month EUR/GBP has recovered around 3.3%. In tandem with this move the UK effective exchange rate has softened by around 1.2% in the same period. The move is likely to have been greeted with some relief to Bank of England policy setters who have been viewing sterling strength as a headwind to UK economic activity.”

Elsewhere, the dollar continued to post significant upticks against selected commodity-linked currencies; up 1.60% against the Norwegian Krone changing hands at NOK8.7982, alongside upticks of 0.59%, 0.04% and 0.84% against the Canadian dollar, Colombian peso and Mexican peso changing hands at CAD$1.3578, COP$3,308.50 and BRL3.7913 respectively.

Finally, the Australian dollar fell further against its US counterpart by 0.74% changing hands at US$0.7213, while the New Zealand dollar fell 0.14% changing hands at US$0.6635.

Kit Juckes, head of forex at Societe Generale, said, “That an OPEC meeting [last week] from which no-one expected anything was the catalyst may tell us there are still some long positions to be flushed. However, beyond the thin December market we're in now, I'd rather be short AUD [or NZD], or any other Asian China-sensitive currency except then yen] than short NOK or CAD here.