FX round-up: PBoC hikes yuan fixing by most since 2005

The US dollar hit an 11-month low on the back of a raft of weaker than expected economic figures released on Friday, even as the president of the Federal Reserve bank of Dallas, Robert Kaplan, told Bloomberg TV he would support an interest rate hike in June if data over the coming months showed the economy was continuing to strengthen.

As of 17:34 BST the US dollar spot index fell 0.62% to 93.178 while the euro/dollar was on its way to end the month at its highest weekly closing level since May 2015.

In parallel, the MSCI emerging markets currency idnex reached its best level since July and was on track for a third successive month of gains and the People´s Bank of China hiked its daily fixing for the US dollar/yuan rate by the most since un-pegged its currency from the Greenback almost a decade ago.

Euro/dollar was 0.78% higher at 1.1440 as traders took advantage of the holiday in Tokyo to push dollar/yen lower by 1.12% to finish the session at 106.90 ahead of the long-weekend in Europe and next Friday´s US jobs report.

Gross domestic product in the euro area accelerated sharply in the first three months of the year to a 0.6% quarter-on-quarter clip, easily outpacing forecasts for a rate of expansion of 0.4% and growth in the UK and the US during that same time frame, data from Eurostat showed.

The 'flash' estimate on Eurozone GDP from the European Union´s statistical office was the first such release and revealed a stronger than expected rate of expansion in France, Spain and Austria.

On the flip-side of the proverbial coin, data Stateside on personal income and spending, manaufacturing activity in the Midwest and consumer confidence all came in slightly below economists´ forecasts.

China hikes daily yuan fixing

Overnight, and close on the heels of the Bank of Japan´s decision somewhat unexpected decision to refrain from adding to monetary policy stimulus, the People´s Bank of China hiked its daily reference rate for the value of its currency, the yuan, against the Greenback by 0.6% to 6.4589 - the biggest such move since the yun was de-pegged from the dollar, in 2005.

However, Bloomberg´s replica of China´s trade-weighted yuan index, or CFETS RMB index, which measures the value of China´s currency against that of 13 of its trade partners, slipped 0.2% to hit a 17-month low.

As of Friday´s close in London, US Fed funds futures were assigning a 14% probability to a June rate by the central bank versus 21% odds just after the Fed´s last policy meeting on 27 April.

In the emerging markets space, the US dollar retreated 0.25% against South Africa´s rand to 14.251, after hitting an intraday low of 14.1152 after the African country posted an unexpected trade surplus of 2.9bn rand for March.

To take note of, South Africa´s high court set aside a 2009 decision which allowed president Jacob Zuma to avoid corruption charges.