USD Gets OPEC Boost As Commodity Currencies Drop

The dollar strengthened on Friday after OPEC decided not to cut oil output, slamming commodity currencies like the Norwegian crown, which fell to five-year lows against the greenback and euro.

The euro slipped before data due at 1000 GMT, which is expected to show euro zone prices rose just 0.3 percent in November. That is deep in the European Central Bank’s “danger zone” for inflation of below 1 percent and even further away from its target of just under 2 percent.

Investors took aim at currencies of oil-rich countries such as Norway and Canada as Brent crude tumbled to a four-year low of $71.25 after OPEC’s decision. Crude is down more than 10 percent this week alone.

The U.S. dollar rallied to 6.9963 Norwegian crowns, a high not seen in over five years, up 0.9 percent on the day. The euro also hit a five-year high of 8.7080 crowns.

Against the Canadian dollar, the greenback rose 0.4 percent to a two-week high of C$1.1384.

“If oil prices remain where they are or decline further, the need to buy these currencies will be less because their exports have become markedly cheaper,” said Hamish Pepper, currency strategist at Barclays in London.

“There’s a very direct channel through which these currencies are impacted.” The dollar rose 0.7 percent against a basket of major currencies to 88.217, leaving it on track to finish November with five straight months of losses – its best run in five years.

via CNBC

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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 has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. 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