Commodity Currencies Dip as OPEC Underwhelms

The Canadian, Australian and New Zealand dollars all fell solidly on Thursday, tracking a drop in oil prices as OPEC countries meeting in Vienna looked like they would go no further with production cuts than previously expected by markets.

The U.S. dollar, which has steadied after its worst week in more than a year, fell 0.1 percent against the index measuring its broader strength while gaining marginally to 111.75 yen JPY= and $1.1213 EUR= per euro respectively.

The Canadian equivalent earlier hit a one-month high of C$1.3385 CAD= after the Bank of Canada gave a more upbeat assessment of the Canadian economy than some investors expected.

But as oil prices struggled to get back into positive territory for the day on the sidelines of the OPEC meeting, it gave up its gains to trade 0.2 percent lower at C$1.3427.

The Norwegian crown, another oil-linked currency also fell initially, before recovering to stand 0.1 percent higher to 9.3320 crowns per euro.

“The talk in the last 24 hours was it going to be a 9 month extension (to oil production cuts) so you can make a reasonable enough argument that everybody was positioned for it,” said Simon Derrick, strategist at Bank of New York Mellon in London.

“That said, I think it (the move) is more to do with a short term dollar bounce.”

The dollar had begun Thursday on the defensive, following Federal Reserve minutes that dialled down some expectations of the central bank hiking interest rates soon.

“Some of those (hawkish) expectations were a bit disappointed following the minutes and we’ve seen the dollar ease off since. That’s also because it’s been quite vulnerable recently,” said Alexandra Russell-Oliver, currency analyst at Caxton FX in London.

The euro has enjoyed a bull run this month, driven by ebbing political concerns over France and upbeat batches of economic data that have strengthened expectations for a tightening of central bank monetary policy later this year.

After a steady climb in morning trade in Europe, the single currency lost steam and traded 0.1 percent lower on the day and around half a cent below Tuesday’s 6-1/2-month peak of $1.1268.

The Australian dollar was half a percent lower at $0.7466 AUD=D4 after Wednesday’s fall to $0.7443 following rating agency Moody’s downgrade of China. The Australian dollar is often used as a liquid proxy for China-related trades but, like the Canadian dollar, tends closely to track moves in major commodities prices.

Reuters

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Dean Popplewell

Dean Popplewell

Vice-President of Market Analysis at MarketPulse
Dean Popplewell has nearly two decades of experience trading currencies and fixed income instruments. He has a deep understanding of market fundamentals and the impact of global events on capital markets. He is respected among professional traders for his skilled analysis and career history as global head of trading for firms such as Scotia Capital and BMO Nesbitt Burns. Since joining OANDA in 2006, Dean has played an instrumental role in driving awareness of the forex market as an emerging asset class for retail investors, as well as providing expert counsel to a number of internal teams on how to best serve clients and industry stakeholders.
Dean Popplewell