Pro-cyclical currencies rise in Asia

Pro-cyclical currencies, Asian currencies climb

Rebounding commodity prices and vaccine optimism have lifted pro-cyclical and Asian currencies this morning. The dollar index rose 0.83% to 90.83 on Friday, but a quiet day on the majors has seen it edge lower to 90.80 in Asia.

Far more activity is being seen on the Australian and New Zealand dollars today, which endured a torrid session on Friday and registered sharp losses. The Australian dollar has risen 0.60% to 0.7750, and the New Zealand dollar is ignoring the Auckland lockdown, increasing 0.58% to 0.7274 this morning. Both have fallen over 3.0% in the previous sessions, so it would be far too soon to say their downward corrections are over in a week packed with event risk. Key support for AUD/USD is 0.7700, and for NZD/USD, it is 0.7200. Failure signals more losses ahead.

The Canadian dollar remains in trouble as well, with USD/CAD at 1.2705 this morning, a stone’s throw away from its resistance line at 1.2725, which extends back to its March 2020 highs. A rise through 1.2725 targets more USD/CAD gains to its 100-day moving average (DMA) at 1.2885 initially.

USD/JPY’s choppy one-month rally is back on track today, with the pair rising 0.35% to 106.55 on Friday. Although unchanged today, USD/JPY should now target 108.00 in the coming days. GBP/USD has fallen back into its multi-month channel and could retreat as far as 1.3750 this week ahead of the UK budget. EUR/USD fell to 1.2075 on Friday, and its critical pivot-point remains 1.2000, with a failure opening more profound losses.

In Asia, the PBOC set the USD/CNY fix slightly higher at 6.4754, but Asian currencies have rallied across the board on vaccine recovery hopes. The yuan, baht, Singapore dollar and Philippines peso are all around 0.20% higher today, ignoring weaker PMI data released earlier. As long as USD/CNY remains confined in a 6.4000/6.5000 range, regional Asian currencies are likely to continue weathering the storms seen elsewhere.

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