Higher-Yield Currencies Boosted as Fed Move Odds Weigh on Dollar
- Aussie, kiwi, loonie among top four G-10 performers this week
- Trend for the currencies to gain may continue, Kaizaki says
Higher-yielding currencies including the Australian dollar headed for weekly gains as receding odds for Federal Reserve interest-rate increases increased their allure relative to the greenback.
The Aussie, New Zealand and Canadian dollars have all strengthened against the U.S. currency since June 3, accounting for three of the top four Group of 10 performers. A gauge of the dollar was set for a second straight week of declines after Fed Chair Janet Yellen said that rates “will probably need to rise gradually over time.” Futures reflect zero likelihood the U.S. central bank will tighten policy on June 15, while the odds for action by July are 18 percent, down from 55 percent on June 2.
The Australian dollar retreated 0.2 percent to 74.16 U.S. cents as of 6:59 a.m. Friday in London. It’s strengthened 0.7 percent this week and reached a one-month high as the Reserve Bank of Australia refrained from cutting its key rate below 1.75 percent. Its New Zealand peer was little changed at 71.01 U.S. cents for a weekly gain of 2 percent. The kiwi surged to its highest level in a year Thursday on the prospect the central bank will hold rates steady at 2.25 percent.
Trend Set?
“The trend may continue for high-yielding currencies to gain while the dollar weakens,” said Yasuhiro Kaizaki, vice president for global markets at Sumitomo Mitsui Trust Bank Ltd. in New York. “The moves after the jobs data for investors seeking carry may still emerge.”
Canada’s loonie has advanced 1.6 percent this week to C$1.2734 against the greenback. The Bloomberg Dollar Spot Index slipped 0.3 percent since June 3, adding to a 1.6 percent decline in the previous week.
ABN Amro Bank NV, the fourth-best overall foreign-exchange forecaster in the latest Bloomberg rankings, predicts the Fed won’t raise rates this year, a decision that should sustain U.S. growth and support investor appetite in financial markets, strategists Georgette Boele in Amsterdam and Roy Teo in Singapore wrote in a note.
“It is likely that this will weigh on the U.S. dollar across the board and support currencies of commodity-exporting countries such as the Canadian dollar, the Norwegian krone and the Australian and New Zealand dollars,” they said.