Commodity currencies flip on waning raw material rates
Date
7/24/2024 8:30:30 AM
(MENAFN) On Wednesday, commodity currencies experienced significant declines, marking multi-week lows primarily influenced by the downward trajectory of raw material prices. The Japanese yen emerged as the strongest performer, surging to a two-month high as traders unwound short positions ahead of an imminent central bank meeting.
The Australian dollar faced a notable 0.5 percent drop toUSD0.6686, approaching critical support levels, and depreciated over one percent against the yen to 101.79, reflecting a substantial 7 percent decline over a two-week period. Similarly, the New Zealand dollar fell by 0.6 percent toUSD0.5914, hitting a three-month low, while the Canadian dollar touched a three-month low of C$1.38 per dollar.
The decline in prices of industrial metals such as iron ore and copper contributed significantly to the weakening of these commodity-linked currencies. Factors driving this downturn include subdued demand from China and broader concerns in Asian markets, exacerbated by disappointing US corporate earnings reports affecting global stock markets.
Jason Wong, senior markets strategist at BNZ in Wellington, highlighted, “We’re seeing softer demand in China and Asia in general, which is putting downward pressure on the kiwi and Aussie currencies.”
The euro and sterling, in contrast, maintained relative stability but touched two-week lows ahead of crucial purchasing managers’ index (PMI) data releases. These upcoming figures are pivotal as they could influence market expectations regarding potential future rate cuts by central banks in response to economic conditions.
Overall, the decline in commodity currencies underscores the impact of global economic dynamics and market sentiment on currency valuations, with a particular focus on raw material prices and regional demand trends influencing investor sentiment and trading strategies in the forex markets.
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