We expect commodity currencies to remain under pressure

Although the currencies of most commodity exporters appear undervalued in the context of high commodity prices, we still think most commodity currencies will depreciate further against the US dollar.
Jonathan Petersen Markets Economist
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FX Markets Weekly Wrap

FX markets likely to remain volatile into year-end

After rallying to its highest level of the year last week, the US dollar seems set to end this week broadly unchanged. In our view, this reflects the offsetting effects of rising short-term yields in the US (particularly after Chair Powell’s comments to Congress on Wednesday) and falling long-term yields amid growing concerns about the Omicron variant. Despite today’s mixed payrolls report, we think the bigger picture remains that sustained inflationary pressures in the US are likely to support faster policy normalisation by the Fed and keep the dollar strong. In addition to uncertainty about the Omicron variant, we expect next week’s CPI data from the US and the wide range of central bank meetings to keep volatility in FX markets elevated throughout December.

3 December 2021

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We anticipate that the rand will remain weak

The South African rand has rallied over the past few days after reaching its lowest level against the US dollar in more than a year following last week’s news about the Omicron variant. Even if the new variant doesn’t lead to a major round of renewed virus containment measures, we think that the currency will remain under pressure from both domestic and external headwinds for much of 2022. In view of the wider interest, we are also sending this FX Markets Update to clients of our Africa Economics Service

1 December 2021

FX Markets Weekly Wrap

COVID throws another curveball

News late yesterday of a new and potentially more dangerous variant of COVID-19 emerging in South Africa has made a dramatic impact on financial markets today. In general, market shifts have been similar to those in previous periods of renewed uncertainty around the path of the pandemic. Risky assets and currencies have fallen across the board today, while bond yields have dropped sharply and safe havens – notably the yen – have rallied. Short-term rate expectations, which had risen significantly in the US and other DMs over recent months, have been pared back rapidly.

26 November 2021

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FX Markets Weekly Wrap

Dollar resumes its rally on the back of strong US data

The US dollar is ending the week higher against most currencies, extending its gains alongside rising US Treasury yields following the stronger-than-expected July payrolls data. With Fed officials earlier this week suggesting that several more months of strong economic data may be enough to start tapering asset purchases, next week’s US inflation data could reinforce expectations that policy normalisation may not be far off. Although we think that the pace of the economic recovery in the US will moderate in the coming quarters, our view is that the dollar will rally further as underlying growth and inflation in the US remain stronger than in most other major economies.

6 August 2021

Capital Daily

We think US real yields are unlikely to stay this low

The yields of long-dated US Treasuries have edged down this week, and those of TIPS have dropped to a new record low, but we still expect both to recover over the next couple of years.

28 July 2021

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The FOMC announcement may extend the dollar rally

While the US dollar has fallen back a little against most currencies in the second half of the week as the sharp sell-off in risky assets and currencies on Monday was reversed, it looks set to end the week slightly stronger, continuing its strong run since the June FOMC meeting.

23 July 2021
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