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Will the Fed lift commodity currencies?

All eyes will be on the U.S. Federal Reserve’s meeting this week. The Fed isn’t likely to move on interest rates at Wednesday’s meeting, but markets are hotly awaiting the post-meeting comments for hints on whether the central bank will raise rates in September.

Should that happen, the dollar could see another burst of strength and put further pressure on commodity-exporting nations like Australia, Canada, New Zealand, Brazil and Indonesia, who are hoping that Fed Chair Janet Yellen will sound a cautious tone and pause the sell-off in those currencies. Australian exports are dependent on iron ore, New Zealand relies on dairy products and energy makes up the bulk of Canadian, Brazilian and Indonesian exports. А sharp tumble in prices of energy, gold, dairy and metals combined with a stronger dollar, and a weakening Chinese economy.

“The U.S. money market appears to be attaching a 25 percent chance to a September move,” noted Shane Oliver – AMP Capital, head of investment strategy and chief economist.

Societe Generale agreed, stating that its central scenario was for a hike in September with a second hike unlikely until early 2016. “That should be enough to dampen pressure on the dollar,” the bank said in a recent note, adding that a 5 percent appreciation over the next three quarters is possible


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