The renewed rally in the US dollar is pressuring the commodities complex as speculation that the Federal Reserve will raise interest rates again as early as next month continues to gain traction.

In recent days, the dollar has rallied while crude oil, gold and most industrial metals have fallen steadily. The prospect of a mere 25 basis points increase in interest is enough to erode the appeal of risk assets to the large institutional investors who prefer to take as little risk as possible.

The greenback strengthened against all but one of its 16 major global counterparts. The Australian dollar was among the largest casualties of the greenback’s surge as central bank comments prompted speculation that borrowing costs there will be slashed. Malaysia’s ringgit and South Korea’s won registered the biggest losses in the emerging markets. WTI (West Texas Intermediate) traded under $48 a barrel as Canada worked towards a resumption of output after severe wildfires.

Gold prices slipped for the 5th consecutive trading day, their longest losing streak since November.

“Frankly, I think that the hawkishness we heard in the FOMC minutes is just the same old white noise they’ve been emitting since December. The reason markets are now taking notice and pricing in a potential June hike is because the economic data has improved, not because the suits at the Fed have ramped up their rhetoric,” said Tony Harris, Senior Vice President of Equity Trading at Softbank CIBC International.

“We’re still very much of the opinion that interest rates aren’t likely to go anywhere this year,” he added.
About Softbank CIBC International:
Softbank CIBC International (SCIBCI) LLC was founded in Tokyo, in 2007. Since our inception, we have grown to become one of the leading institutions in providing North America and European investors’ with access to Asia’s high yielding emerging market opportunities. With retail operations located in Toronto, the provisional capital of Ontario, Canada and corporate headquarters in Tokyo, Japan, in the simplest possible terms, it is SCIBCI’s sole aim to generate consistent high returns on investment through our solid commitment to conscientious and assiduous research and analysis.