Commodity Currencies Rising After Oil Rebound

Commodity currencies like the Australian and New Zealand dollars soared to 10-month highs against the U.S. dollar, drawing support from oil prices which stabilized from a slide and underpinned broad risk sentiment in global markets.

The Australian dollar AUD=D4 rose to $0.7803, its highest since last June and up 0.6 percent on the day. Similarly, the New Zealand dollar NZD= jumped 1 percent to $0.7028, its highest in 10 months.

The oil-linked Canadian dollar CAD=D4 hit its highest since July last year as crude bounced from lows touched on Monday, having come under pressure after major oil-producing countries failed to agree on an output freeze on Sunday.

Brent futures LCOc1 were higher at $43.75 a barrel, holding well above Monday’s low of $40.10. Oil prices had edged higher earlier on Tuesday, supported by a Kuwaiti oil industry strike that has led to a cut in the country’s oil production.

“It is quite amazing how oil prices have recovered from Monday’s lows. That is shoring up risk appetite and pushing up commodity-linked currencies,” said Niels Christensen, FX strategist at Nordea. “As long as oil remains above $43 a barrel we think commodity currencies will remain supported.”

via Commodity currencies like the Australian and New Zealand dollars soared to 10-month highs against the U.S. dollar, drawing support from oil prices which stabilized from a slide and underpinned broad risk sentiment in global markets.

The Australian dollar AUD=D4 rose to $0.7803, its highest since last June and up 0.6 percent on the day. Similarly, the New Zealand dollar NZD= jumped 1 percent to $0.7028, its highest in 10 months.

The oil-linked Canadian dollar CAD=D4 hit its highest since July last year as crude bounced from lows touched on Monday, having come under pressure after major oil-producing countries failed to agree on an output freeze on Sunday.

Brent futures LCOc1 were higher at $43.75 a barrel, holding well above Monday’s low of $40.10. Oil prices had edged higher earlier on Tuesday, supported by a Kuwaiti oil industry strike that has led to a cut in the country’s oil production.

“It is quite amazing how oil prices have recovered from Monday’s lows. That is shoring up risk appetite and pushing up commodity-linked currencies,” said Niels Christensen, FX strategist at Nordea. “As long as oil remains above $43 a barrel we think commodity currencies will remain supported.”

via Reuters

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza