Dollar supported by hawkish Fed comments; Aussie dips on banks rating wa

Currency markets were subdued on the last trading day of the week as volumes were thin due to the summer holiday and in the absence of any major data releases. The main market mover was more hawkish comments from Regional Fed presidents William Dudley and John Williams, which provided some support to the dollar.

Dudley reiterated on Thursday that the US is getting closer to full employment and that economic growth should strengthen in the second half of 2016. Meanwhile, Williams, who is not a voting FOMC member this year, said the September meeting should still be “in play” even though he is not in any hurry to raise rates.

The comments helped the dollar firm against the yen today but the gains were limited and the pair peaked at 100.45 before slipping lower again to around the 100 level in late Asian session. The dollar came under pressure on Wednesday after the FOMC minutes showed the majority of members wanted to see more evidence of a sustained rise in inflation before raising rates again.

The euro and the pound came off yesterday’s highs in Asian trading today as the greenback attempted a rebound. The single currency ignored slightly weaker-than-expected core inflation figures for the Eurozone yesterday to trade near 8-week highs versus the dollar today at 1.1326.

The pound managed to hold above 1.31 dollars when it reclaimed the level on the back of stronger-than-expected retail sales figures yesterday. It was last trading at 1.3128 dollars, but it lost more ground against the euro as the single currency rose back above 0.86 pounds at 0.8632.

The Australian and New Zealand dollars came under pressure on Friday after the rating agency, Moody’s, lowered its outlook on Australian banks to negative. The aussie fell sharply against the US dollar and was last down 0.8% at 0.7621. The New Zealand dollar was also impacted as many Australian banks own stakes in New Zealand banks. The kiwi was down at 0.7261 in late Asian session.

Crude oil prices extended their gains today with US crude climbing to a 6½-week high, while Brent crude rose to a two-month high. Hopes of an agreement of a production freeze by major oil producers in an informal OPEC meeting in September has been driving the current rally. However, a Nigerian oil minister indicated yesterday that a production cut was unlikely. WTI oil futures were last trading slightly off their intra-day highs at $48.19 a barrel.

Looking ahead to the rest of the day, it will be a relatively light calendar day with the only major data coming up being Canadian inflation and retail sales figures and the latest oil rig count from the US.