FX Roundup: Dollar resumes uptick against global crosses

The dollar resumed its uptick against major global currency crosses on Friday, excepting the yen, following the release of minutes from the latest Federal Reserve meeting which indicated the US central bank is set to raise short term interest rates for the first time in almost a decade.

At 1537 GMT, the dollar fell against the yen by another 0.03% changing hands at JPY122.85. Concurrently, the pound fell 0.44% against the dollar exchanging at $1.5224, while the euro fell 0.60% versus the greenback to change hands at $1.0670.

Jane Foley, senior FX strategist at Rabobank, said, “The message from several FOMC members that the Fed is set to hike ‘gradually’ appears to be taking root. USD strength over the past 18 months has already done a lot of the heavy lifting in tightening monetary conditions in the US.

“Consequently, unless US inflation indicators start producing upside surprises, the Fed is likely to retain a very cautious position with respect to policy tightening. This implies that the ECB may have to surprise markets in order to create some downside traction in EUR/USD over the next few months.”

Meanwhile, commodity linked currency crosses saw mixed intraday fortunes with the Australian dollar up 0.56% against its US counterpart exchanging at US$0.7234. The New Zealand dollar fell 0.08% to change hands at US$0.6561. The greenback rose 0.10% against the Canadian dollar exchanging at CAD$1.3297.

Kit Juckes, head of forex at Societe Generale, said, “Huge adjustments commodity currencies have resulted in the production cost of many commodities holding up rather well in local currency terms. So supply has not been cut as much as might be expected, and this is a recipe for an undershoot in commodity prices, except for crude oil.

“We thus remain negative on commodity currencies in the months ahead. Meanwhile, EUR/USD continues to track the Treasury-Bund spread, and is unlikely to lurch sharply lower in the near-term. The low in EUR/USD is likely to come later in 2016 or even 2017 as the rate spread moves gradually in the dollar's favour.

In Latin America, the dollar fell against the Colombian peso (down 0.88%), Chilean peso (down 0.07%), Mexican peso (up 0.68%) and Brazilian real (down 0.34%).