Fx Market Daily 30 Nov. 2016

The US dollar fell on Tuesday as the greenback consolidated its position against most major currencies following a roller-coaster 24 hours which traders say may just be a precursor to three weeks of risk-packed events including the Federal Reserve’s December policy meeting. The dollar index, which tracks the greenback against a basket of six major rivals, scaled to a nearly 14-year peak of 102.050 on Thursday before profit-taking and oil price jitters brought it back down to earth. It has continued to move lower this week, but has remained in a tight range. It was last down 0.34% to 101.
After rising across the board and gaining more than 1.2% against the safe-haven Japanese yen following the release of stronger-than-expected U.S. third-quarter GDP numbers, the dollar retraced much of its gains on the day. The dollar was last up 0.34% against the yen at 112.40 yen. The euro was up 0.29% against the dollar at $1.0644.
Sterling’s move higher against the dollar was also backed by UK data that showed lending to Britons expanded last month at the fastest annual pace in 11 years, while mortgage approvals were stronger than expected, bolstering the picture of resilient consumer demand after June’s Brexit vote. The pound rose 0.61% against the dollar to $1.2491. Against a broadly weaker euro, sterling climbed by as much as 1% to trade back below 85 pence, having just recorded its longest run of weekly gains since early 2015 against the common currency. But since have reversed to be up 0.20% on the day at 0.8519.
Sterling is still almost 10% weaker against the euro compared with before Britain’s vote to exit the EU. But it has climbed 5% since the start of November as the euro has weakened on uncertainty over an Italian constitutional referendum on Sunday and French and German elections next year.
The Canadian dollar weakened against its U.S. counterpart on Tuesday as oil tumbled on doubts that leading exporters will agree a deal to cut crude output and the greenback gained against a basket of major currencies. The Canadian dollar was down 0.21% at 1.3432. Speculators cut bearish bets on the Canadian dollar for the second straight week, according to Commodity Futures Trading Commission data on Monday. Net short Canadian dollar positions fell to 17,462 contracts in the week ended Nov. 22 from 18,599 the prior week.
The Australian dollar paused on Tuesday after soaring commodity prices propelled it to a two-week high, though it was still on track for its worst monthly performance since May. The Australian dollar held steady at $0.7487, following three consecutive sessions of gains. The Aussie is down 1.5% so far this month, set to post its second straight monthly loss. Over the past week, however, it has held its own against the U.S. dollar aided by a sharp rebound in the price of iron ore and coal – Australia’s two largest exports.


The Yuan plumbed 8-1/2-year lows against the dollar last week and other emerging market currencies also fell as the greenback surged following Donald Trump’s surprise victory in the Nov. 8 U.S. presidential election. China is stepping up measures to stem capital outflows, sources said on Tuesday, taking aim at outbound investments that have soared to a record high. The Yuan has rebounded around 0.5% in the past few sessions, with traders reporting Chinese state-owned banks sold dollars for a second straight day to support the currency.
The Chinese Yuan will appreciate against the U.S. dollar in the longer-term, a central bank adviser said, arguing that recent weakness in the currency is largely due to a stronger dollar. The Chinese economy is showing signs of recovery, and if 2016 is the low point in the current economic cycle there is no force to drive further depreciation of the Yuan, Fan Gang wrote in an editorial in financial newspaper China Business News on Tuesday. Goldman Sachs said last week that it was revising its 12-month Yuan forecast from 7.00 to the dollar to 7.30, and to 7.60 by the end of 2018. On Tuesday it was trading around 6.90.


Latin American currencies mostly fell on Tuesday as prices of oil and industrial metals dropped, fostering worldwide risk aversion. The Colombian peso weakened 0.7%. The Mexican peso fell as much as 0.5% but later pared back losses to trade 0.1% lower. The Brazilian real weakened 0.4% to 3.398.
South Africa’s rand plunged as much as 2.5% on Tuesday as the dollar recovered globally and President Jacob Zuma survived calls from inside his party to step down over scandals that have plagued his presidency. Towards the end of the NY trading session the Rand was down 1.05% to 13.87. The rand rose to near three-week highs on Monday after two ratings agencies on the weekend affirmed the country’s investment grade status and on media reports that Zuma faced a vote of no-confidence by the ruling party’s executive committee.
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