FX round-up: Dollar little changed, Rabobank sees weakness in Aussie, yuan and Mexican peso

Cable edged slightly higher ahead of the long holiday-weekend in the States and following two days of sometimes heavy selling in the US dollar.

The lack of further details on his economic plans in a speech delivered on 13 January led traders to pare their bets on the greenback, at least for the immediate short-term.

Nevertheless, what some analysts and journalists termed a "scatter-gun" speech appeared to be trigger a fair bit of analyst commentary focused on the uncertainties surrounding the US President-elect´s approach to world affairs more generally.

On a related note, Jane Foley at Rabobank highlighted how protectionist measures against China might offset the positive impact on world growth from higher fiscal spend in the US, with particular implications for the likes of Australia.

"Not only could a protectionist policy stance from the US mean greater vigilance over Chinese exports, but broadly speaking it has the capacity to slow global growth and counter some of the positive impact of a looser US fiscal position. On top of this we continue to see the possibility of issues related to Chinese high debt levels and demographics translating again into heightened risk aversion in the markets this years. Since China is the world’s largest consumer of commodities this would have a direct impact on the outlook for the Australian economy."

In parallel, two of Foley´s colleagues, Michael Every and Christian Lawrence, wrote: " China would also be vulnerable to US trade barriers given the only thing preventing its FX reserves from declining even faster is the trade surplus it runs. Overall, it still seems likely to us that over the course of 2017 China will opt to let CNY weaken."

Separately, Every and Lawrence said they saw the Mexican peso dropping towards 23.0 against the US dollar over the coming months.

Despite all of the above, as of 1654 GMT the US dollar spot index was trading unchanged at 101.36.

Cable was up by 0.26% to 1.2205 alongside the greenback, while euro/dollar was marginally in the black, edging up by 0.02% to 1.0625.