Commodity Currencies Inch Higher As Oil Slumps

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Currencies linked to commodity or oil-linked currencies such as the Canadian dollar, New Zealand dollar, Russian ruble and the Norwegian krone inched higher as oil prices slumped.

The Canadian dollar was last trading up 0.20% at C$1.3460 per U.S. dollar, down from a five-week high of C$1.3388 touched on Thursday. New Zealand dollar surged back 0.30% to $0.7045 after slipping 0.34% earlier. The Russian ruble and the Norwegian krone rose 0.51% and 0.17% to $0.01766 and $0.1193 respectively.

Oil Prices Slumped

Battered oil prices slumped on Friday after tumbling 5% in the previous session.

On Thursday in Vienna, the Organization of the Petroleum Exporting Countries (OPEC) and some non-OPEC producers agreed to extend a deal to cut around 1.8 million barrels per day (bpd) until the end of the first quarter of 2018, disappointing investors who are betting on longer or larger edges.

Brent crude futures were down from their last close 1.01% to $50.94 per barrel at 8:06 AM EDT as they were still set to end Friday with a weekly loss of more than 3 percent. Meanwhile, U.S. West Texas Intermediate (WTI) crude futures were below $50, at $48.43, slipped 47 cents and 0.96% from their last close.

Matt Simpson, a senior market analyst, wrote in a Friday note, “Oil was practically begging to be knocked off its perch after rallying into the OPEC meeting with wide expectations (for) extended cuts. As the extensions were estimated to be around nine to twelve months, OPEC needed to far exceed this time horizon for oil to sustain its rally.”

Moreover, the dollar index lost 0.12% to 97.08, some risk-off sentiment driving the yen higher, who rose to a 3-day high against the greenback 0.76% to 111.03 yen, while the euro also edged higher 0.13% to $1.1225.

Meanwhile, Sterling fell over half a percent to as low as $1.2870, a two-week low on Friday, pulling further away from a May 18 peak of $1.3048, its strongest level since September last year, after a poll showed a narrowing lead for British Prime Minister Theresa May over her opposition prior to elections next month.

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Currencies Mixed on Fed Rate Hike

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The Federal Reserve (Fed) rate hike has greatly affected currencies with the dollar rising versus a number of major currencies on Thursday.

US Dollar Japanese Yen (USD/JPY) gained 0.07 percent from 112.74 to 112.83 as of 09:05 GMT after hitting an overnight increase of 112.9 the highest level since March 21.

Rise in 10-year US government bond brought in above 2.3 percent which helped US Dollar to a six-week high and 4-month raise against the Aussie dollar.

Australian US Dollar (AUD/USD) was down 0.09 percent to 0.7416 on Thursday.

The Fed closed its two-day policy meeting on Wednesday agreeing to keep rates unchanged and giving a positive evaluation to the US economy.

The Fed also said that it expects the economy to return to normal after bumping into a soft patch in the first three months if the year taking notice of the labor market looking stable and inflation draws near to its target.

The euro found some support from business-friendly candidate Emmanuel Macron’s performance on the televised debate on Wednesday evening before Sunday’s French presidential election run-off, cutting gains for the dollar to less than half a cent at 1.0876.

As of 09:39 GMT, the Euro US Dollar (EUR/USD) rose 0.4 percent to 1.0934 on Thursday.

Richard Benson said that the dollar is strong after the Fed but the euro cannot go down at the moment since commodity prices are dropping which means the strength is up to the commodity foreign exchange space.

Following the Fed’s decision on Wednesday, the US dollar index is currently down 0.3 percent on Thursday from its two-week high of 99.46 to 98.95.

Asian currencies fell moderately on the same day with the yen losing 0.1 percent to 0.0089 its weakest levelin more than six weeks.

Currencies such as the Indonesian rupiah fell 0.01 percent to 0.075 after two days of gains.

An Indonesian cabinet minister said on Wednesday that the government will holdup all planned price increases until after this year’s Muslim festival of Eid al-Fitr in order to help control inflation.

The statistics bureau said on Tuesday that India’s yearly inflation grew to a 13-month high in April generally because of rising electricity taxes.

The Malaysian ringgit also slipped 0.1 percent to 0.2311 after six consecutive gains against the US dollar. Economists estimated Malaysia’s exports in March would grow 19.2 percent earlier year down from 26.5 percent boost in February.

Chinese yuan was down 0.05 percent to 0.145 on Thursday after climbing against the US dollar on the same day following the country’s foreign exchange regulator statement that China will strengthen its clean-up on illegal forex deals this year.

The currency was expected to weaken over by next year with the dollar supported by US interest rate hikes.

The Philippine peso was up 0.1 percent to 0.020 on Thursday defying the situation on most Asian currencies. The currency acquired support in local stocks which went up to more than seven-month high due to earnings in the mining sector.

Meanwhile, gold prices fell to a six-week low on Thursday with gold futures dropping 1 percent to 1,236 by 10:42 GMT while spot gold lost 0.2 percent to 1,234.

Silver futures rebounded 0.01 percent from 16.48 to 16.54 after hitting a four-month low of 16.41 a day earlier.

Copper slipped 0.7 percent from 2.528 to 2.525 a pound.

Platinum futures were down 0.09 percent to 903.25 while palladium gained 0.2 percent from 797.30 to 800.92.

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