FX Roundup: Dollar corrects, commodities currencies remain under pressure

The dollar traded lower against a basket of global currencies on Friday following two strong sessions, but remained strong against commodities linked ones in late afternoon European trading.

Bar a drastic change in the economic outlook, there is no case for a hike in interest rates this year, a US Federal Reserve policymaker said on Friday.

Speaking to CNBC ahead of the Jackson Hole symposium, Minneapolis Fed President Narayana Kocherlakota, who will leave the Fed at the end of 2015, said the US central bank should not consider raising rates this year.

"Barring that [a drastic change in the economic outlook] I don't see a near-term increase in interest rates as being appropriate, and by near-term I mean really through the course of 2015," he said.

The Minneapolis Fed president added that it would take years for inflation to return to target, suggesting it would instead be appropriate to consider further stimulus measures.

The dollar was down 0.20% against the Japanese yen, fetching JPY120.79, and 0.58% lower against the Swiss franc fetching CHF0.9607. The euro also rose 0.05% against the greenback fetching $1.1252, however the pound fell 0.32% fetching $1.5353.

In a note to clients, Kit Juckes, head of forex at Societe Generale, said the EUR/USD cross had the potential to bounce further.

“Market expectations, positioning and near-term macroeconomic risks could support a continuation of the euro rebound in the coming weeks. This will offer better levels to re-set dollar longs later in the fourth quarter. We recommend buying tactically EUR/USD topside via an exotic option offering a large discount compared to a vanilla strategy,” Juckes wrote.

Capital Economics commentators said they were fairly relaxed about the impact of a slowdown in China on the eurozone. “Most importantly, this is because the concerns about the Chinese economy look overblown. And in any case, the direct trade links between the euro-zone and China are fairly small.”

While calm returned to the emerging market FX sphere, commodities-linked currencies continued to suffer. The Australian dollar continued to trade lower, shedding 0.47% against the greenback to change hands at US$0.7132.

The dollar also rose 0.66% against the loonie changing hands at CAD$1.3286, and 0.22% against the Norwegian Kroner exchanging at NOK8.3175.