Aussie leads commodity FX lower on trade tensions; dollar slips

The Australian dollar led commodity-linked currencies lower on Thursday on concerns about a fresh chapter of trade tensions between the United States and China, though broader sentiment remained positive after an overnight rally in global stocks.

In a buying frenzy as spectacular as the recent rout, U.S. stocks soared with the Dow Jones Industrial Average <.DJIA> rocketing more than 1,000 points for the first time on Wednesday, sending global stocks higher. [MKTS/GLOB]

While that lifted other risky assets such as commodities, concerns that the world’s two biggest economies may be opening a new flank of their ongoing trade dispute weighed on sentiment in holiday-thinned trade.

Reuters reported on Thursday that the Trump administration is considering an executive order in the new year to declare a national emergency that would bar U.S. companies from using Huawei and ZTE (SZ:000063) products.

“The oil price bounce pushed commodity currencies higher across the board but the latest Huawei news is a bit of a dampener on sentiment in these thin markets,” said Alvin Tan, a currency strategist at Societe Generale (PA:SOGN) in London.

The Australian dollar <aud=>, often considered a gauge of global risk appetite and highly correlated to global commodities, was down 0.26 percent at 70.51 cents. The Norwegian crown <nok=d3>and the New Zealand dollar <nzd=d3>were also down a quarter of a percent each.</nzd=d3></nok=d3></aud=>

Broadly, the dollar failed to capitalize on a eight-day high hit in the previous session on the back of firmer U.S. Treasury yields with the greenback broadly weaker against a basket of its rivals in early London trading.

The dollar index (DXY), a gauge of its value versus six major peers, slipped 0.2 percent to 96.82, after gaining 0.5 percent on Wednesday.

The greenback’s losses was the most visible against the euro (EUR=EBS) with the single currency gaining 0.3 percent at $1.1385.

It has gained 0.6 percent so far this month but is still set for an annual decline of more than 5 percent on concerns of a dovish European Central Bank./

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