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FOREX-Aussie, Canadian dollars inch lower ahead of Fed statement

Published 29/07/2015, 10:06 pm
FOREX-Aussie, Canadian dollars inch lower ahead of Fed statement
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* Aussie, other commodities-linked currencies under pressure

* Dollar inches higher ahead of Fed statement due 1800 GMT

* Market already retreated from expectations of Sept. move

* Kiwi edges higher after RBNZ comments (Adds more quotes, updates prices)

By Patrick Graham

LONDON, July 29 (Reuters) - Major currencies that are closely linked to commodities prices were back on the defensive on Wednesday as oil prices fell again and traders awaited the outcome later in the day of a U.S. Federal Reserve meeting.

The New Zealand dollar was again the marginal exception to that rule, resisting more losses after its central bank governor played down the chances of further deep cuts to interest rates.

But even with a more encouraging tone on China's stock markets limiting the damage, the Canadian and Australian dollar were both down by 0.2-0.3 percent in mid-morning trade in Europe.

The dollar, euro and yen were all broadly steady, and the broader dollar index against a basket of currencies a touch lower, ahead of a Fed policy statement that may be crucial for fading expectations of a rate rise in September.

"The commitment of many people to a September view has dripped away," said Jane Foley, a currency strategist with Rabobank in London.

"It would be a big surprise for (Fed chief Janet) Yellen to be particularly hawkish today."

Mid-morning in Europe, the dollar was down less than 0.1 percent against the euro at $1.1068 EUR= and flat at 123.56 yen.

The mood around the U.S. currency and economy remains solid. Even if the Fed takes until later this year, or even early next, to raise interest rates, it will be doing so while many of its peers are still looking in the opposite direction.

But there has been a shift away from the past year's expectations of gains against the euro, yen and other majors towards playing for a rising dollar against developing world currencies such as the rand, Brazilian real or Turkish lira.

Among the majors, the biggest loser was the Australian dollar, down almost half a percent to $0.7302 at one point before recovering some ground.

That reflects the growing concerns around economies where growth is reliant on commodity prices at a time when China is slowing, global growth is wobbling and short-term supply of many natural resources is high.

"We expect broad dollar strength against the overall commodity currency complex in developed markets as well as in emerging markets," analysts from Barclays (LONDON:BARC) said in a note focusing on the outlook for commodities prices and currencies.

"Macroeconomic risks, particularly out of China could limit upside demand surprises, supply surprises appear largely to have been on the upside across most commodity markets."

The Fed's policy statement is due at 1800 GMT, and trading ahead of that could be swayed by Wednesday being the last trading day for settlement before the month's end, traders said.

Matt Cobon, head of rates and foreign exchange at Threadneedle Asset Management in London, argued that rate expectations on the dollar had in reality been static this year and that much of a longer-term structural adjustment in favour of the dollar has also been priced in.

"I've been the world's biggest bear on commodity currencies and the world's biggest bear on emerging markets for a long time," he said.

"But for the first time in years I see a relative value opportunity in owning some of this stuff. I think the dollar in terms of fair value is running ahead of where it should be due to cyclical reasons." (Editing by Alison Williams)

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