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FOREX-Commodity currencies hold advantage as dollar waits for inflation and Fed

05/10/2021 20:31
FOREX-Commodity currencies hold advantage as dollar waits for inflation and Fed

Graphic: World FX rates https://tmsnrt.rs/2RBWI5E

Commodity price gains lift exporters' currencies

Dollar bides time before U.S. CPI and Fed speakers

Sterling continues stellar run as coronavirus risks fade

By Stanley White

- The dollar nursed losses against the currencies of major commodity exporters which enjoyed support from expectations for further gains in the price of oil, copper, steel, and other metals.

Traders are keenly awaiting the release of U.S. consumer price data on Wednesday to measure whether inflationary pressure is building, which could push Treasury yields higher and slow the dollar's fall, some traders say.

Treasuries and the dollar have swung back and forth as investors adjust their expectations for when the U.S. Federal Reserve will start tapering bond purchases and raising interest rates as the U.S. economy gains momentum.

A host of Fed speakers this week are likely to leave investors with plenty to consider as they try to forecast how policymakers will react to receding risks posed by the coronavirus in some major economies.

"Right now the easiest reflation trade is to watch commodity prices and buy commodity currencies," said Yukio Ishizuki, foreign exchange strategist at Daiwa Securities.

"The markets have doubts about the Fed's benign view of inflation, but uncertainty about policy keeps some currency pairs in a tight range."

Against the Canadian dollar CAD=D3, the U.S. dollar traded at C$1.2097, close to its weakest in more than three years.

The Australian dollar AUD=D3 edged up to $0.7836, near an 11-week high. Across the Tasman Sea, the New Zealand dollar NZD=D3 was quoted at $0.7267, which is near its strongest level since late February.

The greenback was also near a two-week low against the Mexican peso MXN=.

Many investors expect commodities demand to surge as coronavirus vaccinations allow more countries to resume normal economic activity.

In addition, supply constraints for some commodities suggest that prices could remain elevated for an extended period, which has made some commodity currencies the best performers against the dollar so far this year.

Investors are also focused on how the U.S. labour market will affect inflation in the world's largest economy, but a disappointing nonfarm payrolls report last week has left the dollar mixed against other currencies.

The British pound GBP=D3 bought $1.4130, close to its strongest since Feb. 25 as investors cheered Britain's progress in reopening its economy.

The euro EUR=D3 edged up to $1.2137.

Against the yen JPY=D3, the dollar was flat at 108.87.

In the cryptocurrency market, ether ETH=BTSP was quoted at $3,906, down slightly from a record high of $4,200. Bigger rival bitcoin BTC=BTSP fell slightly to $55,578.


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Currency bid prices at 0006 GMT

Description

RIC

Last

U.S. Close
Previous
Session

Pct Change

YTD Pct
Change

High Bid

Low Bid

Euro/Dollar

EUR=EBS

$1.2137

$1.2128

+0.07%

-0.67%

+1.2143

+1.2127

Dollar/Yen

JPY=EBS

108.8700

108.8400

+0.00%

+5.37%

+108.8800

+108.8100

Euro/Yen

EURJPY=EBS

132.13

132.00

+0.10%

+4.10%

+132.1600

+132.0000

Dollar/Swiss

CHF=EBS

0.9009

0.9012

-0.06%

+1.80%

+0.9011

+0.9006

Sterling/Dollar

GBP=D3

1.4130

1.4117

+0.10%

+3.43%

+1.4132

+1.4115

Dollar/Canadian

CAD=D3

1.2097

1.2103

-0.04%

-4.99%

+1.2104

+1.2091

Aussie/Dollar

AUD=D3

0.7836

0.7830

+0.08%

+1.87%

+0.7842

+0.7830

NZ Dollar/Dollar

NZD=D3

0.7267

0.7262

+0.08%

+1.20%

+0.7272

+0.7261










All spots FX=

Tokyo spots AFX=

Europe spots EFX=

Volatilities FXVOL=

Tokyo Forex market info from BOJ TKYFX


(Reporting by Stanley White
Editing by Shri Navaratnam)

(([email protected]; +81 (0)3 4563 2799; twitter.com/stanleywhite1 ;))