US dollar hits 3-month high while commodity-linked currencies tumble

Vrasidas Neofytou
Head of Investment Research

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US dollar hits 3-month high while commodity-linked currencies tumble

US dollar continued its upward momentum on Thursday morning, climbing to the highest level since early April after minutes of the Federal Reserve’s June meeting indicated a possible tapering of its asset purchases as soon as this year.

Dollar strength against Euro and Sterling:

The DXY-US dollar index against six major currencies rose to as high as 92,70 this morning before retreating to near 92,40.

DXY-US dollar index, 4-hour chart

The elevating dollar and the general market’s risk aversion sentiment have added pressure to EUR/USD pair which dropped below $1,18 level at one point before rebounds to near $1,1830, while the GBP/USD dropped to as low as $1,3750, with both pairs posting a fresh 3-month low.

Risk-off across the commodity-linked currencies:

The bullish sentiment in the greenback coupled with the falling commodities prices has sent the growth risk-sensitive Australia, New Zealand, and Canadian dollars to six-month lows, despite the rate hike expectations from their local central banks.

Both WTI and Brent crude oil contracts have retreated by more than 10% from recent highs, while the price of Copper, Iron ore, Aluminum, and Lumber has lost more than 20% since topping last month.

AUD/USD, 4-hour chart

As a result, investors have start deleveraging some positions in the commodity-linked currencies, with AUD/USD breaking below $0,745 for the first time since December 2020, the NZD/USD falling below the key support level of $0,70, while the USD/CAD bouncing off recent lows towards $1,26 mark.

USD/CAD, 4-hour chart

Hence, other commodities-sensitive currencies such as Norwegian Krone, Mexico Peso, and Russia Ruble have also retreated from their recent multi-year highs against the greenback, following the weakness in the crude oil and base metal prices.

However, the dollar has lost some ground against the safe-haven currencies, breaking below from the key level of 110 to Japanese Yen and losing the 0,92 level against the Swiss Franc amid the risk-off sentiment following the spread of “Delta” covid variant around the world.

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