Commodity Currencies Rebound Sharply
AUGUST 24, 2021
After losing value yesterday as stocks rallied, the U.S. dollar was mostly flat overnight against most of its G10 counterparts.
However, the greenback did have considerable losses versus commodity-backed currencies. Global equities are mixed but American futures show U.S. equities will open again in the green. Analysts point to the FDA’s full approval of the Pfizer vaccine as perhaps a turning point in the fight against covid and get the economy back into full recovery mode. Time will tell.
There is little in the way of economic data on today’s docket. The Richmond Fed Manufacturing Index for August and new home sales for July are due out at 10 a.m. Jerome Powell’s speech at Jackson Hole on Friday is the marquee risk event this week.
What to Watch Today…
- New Home Sales at 10:00 am
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The New Zealand dollar was the biggest winner overnight, gaining nearly a percent against the U.S. dollar. The Kiwi also rallied to its highest level in more than a year against the Australian dollar. The overnight strength comes as Reserve Bank of New Zealand Governor Christian Hakseby said that the central bank decided not to raise rates last week because of communication challenges, not economic fundamentals.
The market has taken those comments to mean that RBNZ is eager to begin its tightening cycle and will likely begin later this year.
In addition to the New Zealand dollar, other commodity-based currencies are also on the offensive as the price of oil rebounded over 5% over the last two days and iron ore climbed. The Canadian dollar is 1.5% stronger this week, recovering from major losses from earlier this month. If today’s move holds, it will represent the third consecutive session the loonie has gained.