US dollar dips as crude oil surge supports commodity currencies

The US dollar is on the downtrend today especially against commodity-based currencies supported by strong oil. — Reuters pic
The US dollar is on the downtrend today especially against commodity-based currencies supported by strong oil. — Reuters pic

TOKYO, April 9 — The dollar was shackled today by a combination of weak US economic data and gains for commodity-linked currencies such as the Canadian and Australian dollars which drew support from an extended surge in crude oil prices.

The US dollar index against a basket of six major currencies inched down 0.05 per cent to 97.001 after losing 0.35 per cent the previous day, marking its biggest daily decline since March 20.

On top of the pressure from buoyant commodity-linked currencies, the dollar was weighed by data showing US durable goods orders declined in February and a bounce in the euro as investors squared positions ahead of a looming European Central Bank meeting.

“The dollar's strength peaked out towards the end of last week, when the US jobs data showed that wage increases had slowed. The currency hasn't been able to find traction since," said Shin Kadota, senior strategist at Barclays in Tokyo.

“And the latest bounce in US yields did not provide much lift for the dollar as they still remain at low levels in absolute terms.”

The 10-year Treasury yield bounced to 2.52 per cent, edging further away from a 15-month low of 2.34 per cent plumbed at the end of March. The yield was still significantly below its recent highs around 2.8 per cent hit in early March.

The Canadian dollar was little changed at C$1.3312 per US dollar after gaining more than 0.5 per cent overnight.

The Australian dollar was steady at US$0.7128 having risen 0.3 per cent the previous day.

Oil prices have surged to five-month highs on expectations that global supplies would tighten due to fighting in Libya, Opec-led cuts and US sanctions against Iran and Venezuela.

“Themes such as US-China trade talks and Brexit are turning rather stale and no longer providing the currency market with as much incentive. The rally in crude gave the market something to focus on under such conditions,” said Bart Wakabayashi, Tokyo branch manager at State Street Bank.

The Norwegian kroner held to its gains and stood at 8.543 per dollar after rallying 0.7 per cent the previous day on higher crude.

The kroner was also boosted after Norges Bank Governor Oeystein Olsen said yesterday that the central bank will continue to hike interest rates over the coming months.

Oil-rich Norway stands alone among other developed economies in tightening monetary policy, thanks to rising crude prices and higher-than-anticipated economic growth and inflation.

The euro was effectively flat at US$1.1265 after advancing 0.4 per cent yesterday, when it ended a two-day losing streak.

The pound edged up 0.1 per cent to US$1.3078, having traded in a narrow range so far this week, reflecting nervousness in the market about key Brexit talks between British Prime Minister Theresa May and the opposition Labour Party.

Britain is due to leave the European Union on Friday but May is seeking a compromise with the Labour Party regarding terms for Brexit ahead of an EU leaders' summit tomorrow.

May heads to Berlin and Paris on Tuesday to meet German Chancellor Angela Merkel and French President Emmanuel Macron before setting out the case for another delay at tomorrow's EU summit in Brussels.

The US dollar shed 0.1 per cent to 111.37 yen to put additional distance between a three-week peak of 111.825 scaled on Friday. — Reuters

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