FX Roundup: Greenback pummels commodity linked currencies

Earlier in the session, China's central bank set a lower fix for the country's currency against the dollar. The People's Bank of China set the mid-point for the so-called 'onshore' yuan at 6.5314 per dollar - its lowest since 2011 - 0.22% below the previous day's level.

At 1608 GMT, the already beleaguered Australian dollar fell against its US counterpart exchanging at US$0.7070, down a further 1.27% extending overnight declines, while the New Zealand dollar was down a further 1.03%, changing hands at US$0.6636.

The greenback also registered gains against the Canadian dollar changing hands at CAD$1.4084, up 0.63%. In Latin America, the dollar traded higher against major regional crosses posting gains versus the Chilean (up 0.17%), Mexican (up 0.59%) and Colombian (1.35%) pesos, and the Brazilian real (up 0.47%).

Simon Smith, chief economist at FXPro, said: “The CAD is of particular note as the USD/CAD cross threatens a sustained push above the 1.40 level. A further easing from the Bank of Canada cannot be ruled out and it is divergence in underlying interest rate policy that is a very powerful fundamental driver of currency trends. For this reason, the Canadian jobs data this Friday could eclipse the US release for its significance to currency markets.”

Elsewhere, the pound sterling fell 0.42% versus the dollar exchanging at $1.4614, while the euro came in broadly flat changing hands at $1.0751, up a mere 0.03%.

Jane Foley, senior FX strategist at Rabobank, said, “Through a large part of last year, the sterling was riding high on anticipation that the Bank of England would be the next G10 central bank to follow the US Federal Reserve’s rate hike.

“This may still be the case but as the market waits for the Bank to make its move, interest rate differentials could push cable to 1.44 later this year. EUR/GBP may still edge towards 0.70 this year on the back of a dovish European Central Bank, but UK political risk related to EU membership has the potential to lift volatility and may whack GBP hard.”

However, safe have demand continued to perk up the yen, with greenback slipping 0.33% versus the Japanese currency to JPY118.67.