Commodity-linked currencies slipped in Asian trading on Tuesday as commodity prices were weighed down by the strong dollar. The Australian dollar was one of the worst performers as it was further weighed by comments by the RBA Governor Glenn Stevens earlier today. Speaking in Sydney, Stevens reiterated the central bank’s commitment to the inflation target band of 2-3%, adding that inflation in Australia is currently “a bit too low”.
The comments increased the prospects of further rate cuts, sending the aussie sharply lower against the US dollar to drop by 0.7% to below the 0.72 level. It was last trading at 0.7168 in late Asian session. The New Zealand dollar also came under pressure and was down 0.6% at 0.6713.
Another currency affected by weaker commodity prices was the Canadian dollar. Lower crude oil prices ensured that the loonie was unable to break a 5-day losing streak. The US dollar climbed to a 7-week high of 1.3183 versus the loonie in today’s Asian trading.
The greenback was steadier against other currencies as it was trading broadly flat against the yen, the euro and the pound.
The yen continued to be supported by reports from the weekend’s G7 meeting that the US is strongly opposed to any moves by Japanese authorities to intervene in the currency markets. The dollar was slightly firmer against the yen at 109.33 in late Asian trading.
The euro meanwhile briefly spiked up to 1.1226 dollars after the release of German GDP figures which confirmed that the German economy expanded by 0.7% in the first quarter of the year. However, it later fell back to trade around the 1.12 level.
The dollar was broadly firmer against a basket of currencies on Tuesday as Fed policymakers continued to signal to the markets that rates could be raised as early as June. Philadelphia Fed President Patrick Harker said on Monday that a June rate hike would be “appropriate” unless the data weakens.
Coming up later today, the ZEW economic sentiment survey out of Germany will be watched while new home sales will be the main data out of the US. Also to keep an eye on are speeches by ECB officials Praet and Nouy, as well as the outcome of the Eurogroup meeting later today where Eurozone finance ministers will discuss a possible debt relief for Greece.