FX Roundup: Dollar strengthens; commodities-linked forex in mixed session

The dollar strengthened on positive US jobs data on Wednesday, while the euro saw lacklustre trading as selected commodities-linked currencies partially reversed losses from the previous session.

US private sector employment gains accelerated slightly last month, according to figures released by Automatic Data Processing (ADP). Employers added 190,000 jobs in August, while July's was revised down to 177,000 from a prior estimate of 185,000. Analysts had expected a reading of 200,000.

Elsewhere, the US Mortgage Bankers Association (MBA) said its seasonally adjusted index of application activity, which covers home purchase demand and refinancing demand, climbed 11.3% in the week ended 28 August.

The seasonally adjusted sub-index of refinancing applications fell 16.8% to its highest level since April, while the index of loan requests for home purchases, a key indicator of home sales, rose 4.1% to its highest level since July.

In response, the dollar strengthened against the Japanese yen fetching JPY120.21 up 0.70% at 1423 BST. The pound also fell against the dollar changing hands at $1.5287, down 0.11%. Meanwhile, tepid euro trading saw €1 change hands at $1.1232, down 0.73%, reversing Tuesday’s gains in what has been a very volatile week in the equities and commodities markets.

Kit Juckes, head of forex at Societe Generale, said, “Currencies are naturally sensitive to the volatility in equity markets (and in commodities for that matter). Maybe, once the first US interest rate hike is finally behind us, if that day ever dawns, we will see calmer markets.

“But for now and until the FOMC meeting on 17 September for starters, FX and rates markets will be the tail that is wagged by the equity and commodities dogs. Bubbles are being deflated.”

Commodities linked currencies saw another mixed session. The Canadian dollar suffered with overnight data confirming the country had entered a technical recession. For much of the early afternoon session, one dollar was fetching on average CAD$1.3224, down 0.26%.

However, the greenback was weaker against the Norwegian Kroner, changing hands at NOK8.2524 down 0.43%. The Australian dollar was broadly flat fetching US$0.7021, up 0.03%, but continuing to show signs of stress in the face of a weakening Chinese economy.

Jane Foley, senior currency strategist at Rabobank, said, “We have lowered our bearish forecasts for AUD/USD even further and see scope for a move towards 0.68 on a six-month view.

“The lack of inflation pressures in the Australian economy coupled with our expectation that the value of yuan (versus the dollar) is set to continuing falling in the months ahead, underpins our expectations that the Reserve Bank of Australia will cut rates again in the coming months.”