Commodity Currencies Fell Victim to the Liquidation of High Yielders

Even the commodity currencies could not hold up against the liquidation of high yielding currencies today. Both the Australian and New Zealand dollars hit fresh decade highs before turning around to the end the day weaker against the US dollar.

The kiwi fell the most despite an interest rate hike by the central bank yesterday. The statement was hawkish and the futures curve is pricing in more rate hikes this year which indicates that the liquidation is clearly just a reflection of rising risk aversion. The Australian dollar held up far better although it too saw major intraday losses thanks to strong employment numbers. After seeing very strong job growth in April, Australian companies added 39k people onto their payrolls in the month of May. This brought the unemployment rate down to a 4.2 percent, which is a new 32 year low. The Canadian dollar also dropped despite the rise in oil. There was no Canadian data released this morning, which suggests that the traders may be looking for softer employment and trade figures tomorrow. April data has been weak and the strong CAD could have put a big dent in exports.