Commodity Currencies Hit Multi-Week Lows Amid Weakening Raw Material Prices

Commodity currencies plummeted to multi-week lows due to weakening raw material prices. The Canadian dollar reached a three-month low ahead of an anticipated rate cut, while the Australian and New Zealand dollars also saw significant drops. A weak outlook for Chinese demand and risk aversion in stock markets further fueled the downturn.

Commodity currencies faced substantial declines on Wednesday, hitting multi-week lows as raw material prices weakened. Notably, the yen surged to a two-month high, compelling short sellers to exit positions ahead of the upcoming central bank meeting. The Canadian dollar fell to a three-month low of C$1.38 per U.S. dollar, with a second consecutive rate cut anticipated by the Bank of Canada later the same day.

The Australian dollar declined by as much as 0.5%, reaching $0.6583, close to early June support levels. Meanwhile, it dropped more than 1% against the yen to 101.79 yen, recording a nearly 7% fall in two weeks. The New Zealand dollar similarly tumbled by 0.6%, nearing a three-month low at $0.5914.

Falling prices for industrial metals like iron ore and copper, spurred by a pessimistic outlook for Chinese demand and investor risk aversion following lackluster U.S. earnings, contributed to these currency movements. Senior markets strategist Jason Wong of BNZ in Wellington noted, "We're seeing softer demand in China and Asia in general and the kiwi and Aussie just being pulled down."

(With inputs from agencies.)