U.S. dollar rises against commodity currencies amid drop in consumer sentiment

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Graphic: FX rates: https: tmsnrt.rs 2 RBWI 5 E by Gertrude Chavez-Dreyfuss and Saikat Chatterjee NEW YORK LONDON, Aug 16 - The dollar rose against commodity currencies such as the Australian and Canadian dollars, while the safe-haven yen gained as disappointing financial data from China, political tension in Afghanistan and the spreading Delta virus weighed on risk appetite The dollar gained after recent losses following a weakening of consumer sentiment on Friday followed the decline in consumer sentiment weakened the U.S. unit. Against a basket of six major currencies, the greenback was little changed to slightly higher at 92.593 after falling to a one week low of 92.468 on Friday. Its gains were most pronounced against commodity currencies. The Aussie dollar was below US $0.7323, while the New Zealand dollar became 0.7% lower to US$0.07040 ahead of a Reserve Bank of New Zealand policy meeting on Wednesday, at which economists expect the first hike in benchmark interest rate since 2014. The Canadian dollar rose against the greenback to C $1.2565. The spreading virus, the disappointing Chinese data, and the news that the Taliban have captured Kabul has dampened risk appetite, said Marc Chandler, chief market strategist of Bannockburn Global Forex. But currencies stuck to large trading ranges as investors were wary of taking large bets at the beginning of a busy week for central banks. As the latest CoVID - 19 outbreak weighed on China's retail sales, industrial production and fixed asset investment were all weaker than expected as the latest COVID-19 outbreak weighed on the world's second-largest economy. Long positions on the greenback swelled to their largest levels since March 2020, suggesting the recent move lower would be more a structural downtrend than the beginning of a temporary thing set back. The release of Fed minutes this week will be crucial to the short-term outlook of the greenback, especially if it confirms more policymakers are leaning toward tapering its bond purchase plan by the end of the year. MUFG strategists noted there was a clear pattern for the U.S. dollar to strengthen modestly following Fed minutes release, but there is the risk of a bigger market reaction when Fed's policy is moving closer to a pivot point. It poses the quiet event risk of disrupting the main period of trading we have seen over the summer, they said. Political unrest in Afghanistan in which Taliban insurgents took over Kabul over the weekend undermined market sentiment. For currencies, volatility is nearing 2021 lows even when due to the summer lull and already low levels. Elsewhere, minutes from the latest meeting of Reserve Bank of Australia are due on Monday. In cryptocurrencies, bitcoin edged higher to around $47,162, approaching the three month high of $48,190 marked over the weekend.