FX round-up: Argentine peso in the spotlight, BofA calls euro higher

Investors pushed the US dollar higher on Tuesday on the back of a potent mix of trade concerns and strong US economic data, although at least versus the euro some analysts argued the tide was about to change, predicting that the single currency was set to gain.

Against that backdrop, as of 1935 BST the Greenback was 0.31% higher against the Chinese yuan at 6.8442, by 1.22% against Argentina's peso to 38.9544 and by 0.78% to 6.6880 versus the Turkish lira.

Regarding the situation in Argentina, the spotlight was on a meeting between the country's government and the International Monetary Fund scheduled for Tuesday evening.

However, the IMF was quick to temper expectations, saying it was too soon to talk about details or possible timelines.

Ahead of that rendezvous, analysts at Rabobank told clients: "If a larger credit line from the IMF is not forthcoming then in an environment of rising USD and US interest rates it is hard to see where the relief will come from for ARS and indeed other EM currencies with twin deficits and high levels of USD denominated debt."

Nevertheless, the Dutch broker cautioned that over the longer-term the emergency measures that Buenos Aires had announced just the day before - in a bid to bolster the economy - would be counterproductive, because the country's weaknesses lay in its private sector and not in the public accounts.

"As long as the US continues to raise rates, keep corporate taxes relatively low, blow-out the fiscal deficit, sucking in USD, and keep trade war fears on the radar, the Dollar will remain on the front foot vs. EM. The only way round that is for them to ring-fence themselves with a vast trade surplus not being run with the US: and good luck in trying to do that given the global architecture has been built precisely to sell to the US as end-consumer," Rabobank added.

Versus its major trading partners - which includes China - the US dollar was higher by less, with the US dollar spot index adding 0.32% to 95.4490.

Euro/dollar was off by a similar amount, slipping 0.35% to 1.15788, but up versus the pound and the Japanese yen.

Commenting on the outlook for the euro, strategists at Bank of America-Merrill Lynch said: "We may see one more leg to the USD rally short term, from Italy risks and trade tensions, pushing EURUSD below 1.15 again. This may offer an opportunity to buy the EUR dip. We forecast EURUSD at 1.20 next year, but also see some risks to this view."

Commodity currencies were also weaker, with the Aussie giving back 0.49% to 0.71784 US dollars, while versus the Loonie, the US dollar was up by 0.63% to 1.31776.

To take note of, overnight the Reserve Bank of Australia had kept its main policy rate unchanged at 1.75%, while rate-setters at the Bank of Canada were set to meet to decide on rates on Wednesday.