FX Roundup: Dollar rally cools as euro reverses losses

At 1612 GMT, the dollar shed 0.88% against the yen changing hands at JPY121.48. Meanwhile, the pound fell against the dollar to exchange at $1.4896 down by 0.03% having marginally recovered from eight month lows, while the euro rose 0.19% to change hands at $1.0840.

Following the US Federal Reserve’s decision to raise benchmark interest rates by 25 basis points late on Wednesday, Chairwoman Janet Yellen assured the market that any future rate increases would be gradual and depend on economic growth.

She added that if the Fed had continued to delay a rate rise, it could have been forced to implement a more aggressive increase if economic growth soared and inflation suddenly jumped towards the 2% target.

Commodity linked currency crosses also got a reprieve. In Latin America, the dollar traded lower against the Chilean (up 1.23%), Mexican (down 0.32%) and Colombian (down 0.20%) pesos but rose 0.56% against the Brazilian Real.

Kit Juckes, head of forex at Societe Generale, said, “The Mexican peso is the standout winner in Latam forex, as the central bank responded to the Fed move by hiking rates itself. Meanwhile, the Brazilian real is worst-performing of the Latam currencies with the exception of the newly-floating (aka sinking) Argentine Peso.

“Otherwise it's a mixed bag, with Asian currencies moving in tight ranges despite the USD/CNY fix coming in higher day after day. I'll give honourable mention to Indian Rupee, the pick this week in Asia, and note that in December overall, the Chilean Peso and Indian rupee are the only currencies to have rallied against the US dollar.”

Finally, the Australian dollar was up 0.73% against its US counterpart exchanging at US$0.7181, while the New Zealand dollar was up 0.66% to change hands at US$0.6745. The greenback also shed gains against the Canadian dollar changing hands at CAD$1.3891, down 0.33%.