FX Roundup: Dollar slips on disappointing data

The dollar headed lower on Wednesday following the release of disappointing data, while commodity linked currencies got respite in wake of firmer oil prices.

Markit’s final reading of the US services purchasing managers’ index was revised to 53.2 in January from a previous estimate of 53.7, down from 54.3 in December. A reading above 50 signals expansion while a level below that indicates a contraction in sector activity growth.

ISM’s US non-manufacturing composite also fell short of estimates. The index dropped to 53.5 in January from 55.8 in December, compared to forecasts of 55.2.

At 1602 GMT, the dollar was 1.73% lower against the yen changing hands at JPY117.89. The pound was up 1.28% versus the greenback changing hands at $1.4595, while euro rose 1.26% exchanging at $1.1057.

Meanwhile, Bank of England is largely expected to reveal a dovish stance when it publishes its latest interest rates decision, minutes of its monetary policy meeting and the February quarterly inflation report on 'Super' Thursday.

Kit Juckes, head of forex at Societe Generale, said, “Super Thursday at the BoE tomorrow and newspapers dominated by the Brexit story will attract more attention however, it doesn't suggest we'll get much of a bid to the pound sterling.

“With US yields down, efforts of Bank of Japan and European Central Bank to hold down their currencies against the dollar are going to remain difficult and a break higher in EUR/USD is still a risk. USD/JPY has already failed to hold its gains. Low Treasury yields threaten EUR/USD break higher.”

The dollar also fell against commodity linked currency crosses with oil prices staying largely in positive territory for much of the Asian and European sessions, helped in no small part by economic data from Australia and New Zealand.

New Zealand's fourth employment data saw the country’s unemployment rate drop from 6% to 5.3% and a 0.9% quarter-on-quarter jump in employment. Australian trade data, by contrast, was less upbeat with an AUD3.54bn deficit in December taking the annual deficit to a record AUD32.7bn.

The Australian dollar was up 1.01% against its US counterpart exchanging at US$0.7110 as the Reserve Bank of Australia held firm on interest rates overnight but kept the door open to further cuts in wake of the BoJ’s move to introduce negative interest rates.

The New Zealand dollar jumped 2.19% changing hands at US$0.6658. “AUD/NZD has failed at 1.10 and may have a good look at parity again, at which point we will be interested in buying AUD,” Juckes added.

The greenback also fell 1.44% against the Canadian dollar exchanging at CAD$1.3852. Finally, the dollar headed lower against Latin American currencies posting declines of 0.58%, 0.84% and 1.15% against the Colombian peso, Chilean peso and Brazilian Real.