Dollar index near 4-month highs on U.S. rate hike view

  • Dollar index trading near 4-month highs
  • Net long dollar positions highest since June – IMM data
  • Aussie stung by weak Chinese data, drop in commodities

LONDON, Aug 10, 2015 – The dollar stayed close to a nearly four-month high against a basket of currencies on Monday on Fed rate hike expectations while commodity-related currencies weakened after soft weekend data on China’s economy.

The Australian and New Zealand dollars both lost about 1 percent. The dollar index was up 0.3 percent at 97.876, after rising as high as 98.334 on Friday, its strongest since April 23, after data showed U.S. nonfarm payrolls rose 215,000 last month.

That fell short of expectations for a rise of 223,000 jobs but was still viewed as consistent with a strong labour market, and the previous two months were upwardly revised.

The dollar hit a two-month high of 125.07 yen on Friday, and was last up 0.5 percent at 124.75, buoyed by elevated two-year U.S. Treasury yields. The euro was down 0.3 percent at $1.0930.

“The jobs data was supportive for a September rate hike,” said Jeremy Stretch, head of currency strategy at CIBC World Markets.

“U.S. yields are modestly higher, but dollar/yen needs more widening of the interest rate spread to take it higher. Right now, there isn’t much of a conviction so it will be a slow grind higher for the dollar.”

Speculators increased bullish dollar bets to their highest since early June, according to Reuters calculations and data from the Commodity Futures Trading Commission released on Friday. The value of the dollar’s net long position climbed to $32.77 billion in the week ended Aug. 4, from $29.79 billion the previous week.

Meanwhile, the Australian dollar fell 0.8 percent to trade at $0.7359, hurt by a drop in commodities and oil and by the biggest drop in Chinese exports in four months in July, 8.3 percent compared with a forecast 1 percent fall.

“The Aussie is the most exposed G10 currency to trade with China. Iron ore imports fell 29 percent in the year to July, highlighting that once the second-round effects of lower commodity prices kick into weaker data in Australia, there is likely to be another leg lower in the currency,” Morgan Stanley said in a note to clients.

XAU Gold stalls as US jobs data keeps door open to Sept Fed hike

  • Gold had longest weekly losing streak since 1999
  • Any delay in rate hike expectations won’t fuel gold rally -HSBC

MANILA, Aug 10, 2015 – Gold ticked higher but stayed within striking distance of a 5-1/2-year low on Monday, after solid U.S. job gains in July suggested the Federal Reserve could raise interest rates as early as next month.

U.S. nonfarm payrolls increased 215,000 in July, less than the 223,000 rise that economists had expected, but still seen in line with a tightening labour market. Payrolls data for May and June was revised to show 14,000 more jobs created than previously reported.

Spot gold XAU= was up 0.3 percent at $1,096.10 an ounce by 0622 GMT, recovering from an early low of $1,089.40.

Gold managed to eke out marginal gains on Friday after the jobs data was released, with the smaller-than-forecast number spurring some hopes that the Fed could hike rates later than September.

“While a delay in rate hike expectations may ease some of the near-term pressure on gold, it does not mean prices would rally from current levels given expectations that the Fed will eventually hike rates,” said HSBC analyst James Steel.

A looming U.S. rate rise, the first since 2006, had weighed on non-interest yielding gold, pulling more funds to the dollar. The greenback stayed close to its highest level since April against a basket of currencies.

The metal fell for a seventh week in a row last week, its longest such retreat since 1999, having struggled to pull away from a 5-1/2-year trough of $1,077 reached during a late rout in July.

U.S. gold for December delivery GCcv1 gained 0.2 percent to $1,096 an ounce.

Holdings of SPDR Gold Trust GLD, the world’s largest gold-backed exchange-traded fund, slipped further, hitting 21.47 million ounces on Friday, the lowest since September 2008.

Top gold consumer China is under growing pressure to further stimulate its economy after disappointing data over the weekend showed another heavy fall in factory-gate prices and a surprise slump in exports.

China’s foreign exchange reserves, the world’s largest, fell by $42.5 billion in July to $3.65 trillion, the sharpest monthly drop since March amid signs of capital outflows. The value of China’s gold reserves dropped to $59.24 billion from $62.4 billion.

Spot platinum XPT= rose 0.7 percent to $966 an ounce and palladium XPD= eased 0.3 percent to $596, both still close to last week’s multi-year lows. Silver XAG= gained 0.3 percent to $14.88 an ounce.