Commodity currencies tumble on weakening raw material prices

Commodity currencies fell to multi-week lows on Wednesday due to declining raw material prices. The yen saw the most significant gains, reaching a two-month high as short sellers exited positions before a central bank meeting.

The Australian dollar dropped by 0.5 per cent to $0.6686, nearing chart support levels, and declined over one per cent to 101.79 yen, marking a nearly 7 per cent decrease in two weeks.

The New Zealand dollar also fell by 0.6 per cent to $0.5914, reaching a three-month low, while the Canadian dollar hit a three-month low of C$1.38 per dollar.

The decline in industrial metal prices, like iron ore and copper, hit a three-and-a-half-month low due to weak Chinese demand and stock market concerns over disappointing US earnings.

“We’re seeing softer demand in China and Asia in general and the kiwi and Aussie just being pulled down,” said Jason Wong, senior markets strategist at BNZ in Wellington.

The decline in commodity currencies was largely driven by a weaker outlook for Chinese demand, with industrial metals like iron ore and copper hitting three-and-a-half-month lows.

The euro and sterling were relatively stable, with both currencies touching two-week lows ahead of the release of purchasing managers’ index data. This data will be crucial in determining the likelihood of rate cuts in the coming months.

Attribution: Reuters