Oil-Exporter Currencies Gain at Yen's Expense as Crude Rallies

  • Canadian and Australian dollars snap two days of losses
  • G-20 meeting should add to global confidence, Citigroup says

The currencies of commodity exporters rose as an oil rally boosted investors’ appetite for higher-risk assets.

The Canadian and Australian dollars climbed for the first time in three days amid speculation that some crude exporters will freeze production. Japan’s currency, traditionally a haven, fell for the first time in three days and the euro slid to its weakest in almost three weeks.

Commodity exporters have been some of the hardest hit by a wave of risk aversion that’s swept across higher-yielding assets this year amid concern that a slowing Chinese economy will damp growth around the world. Currencies from those nations are taking back some of their losses on speculation the slump is due for a respite, with OPEC members discussing output and representatives of the Group-of-20 nations set to meet this week.

“Commodity-based currencies are going to do fairly well this year,” said Ilya Feygin, a New York-based managing director and senior strategist at WallachBeth Capital LLC. “Too much pessimism has been priced into commodities. I’d expect Aussie to rally.”

The Canadian dollar gained 0.4 percent to C$1.3706 per U.S. dollar and Australia’s dollar climbed 1.1 percent to 72.27 U.S. cents as of 5 p.m. in New York. Japan’s currency depreciated 0.3 percent to 112.92 per dollar and the euro slumped 0.9 percent to $1.1030.

Oil futures rose 6.2 percent to $31.48 a barrel in New York, reaching a three-week high on a closing basis.

Policy Chatter

Commodity-linked currencies rallied after Saudi Arabia, Russia, Venezuela and Qatar reached a preliminary agreement in Doha last week to freeze output at January levels if other states join them. A global oil glut is set to persist into 2017, the International Energy Agency said.

“Oil is the primary catalyst for today, as the willingness for OPEC and non-OPEC members to be entertaining the notion of a freeze certainly puts a floor in sight in terms of near-term crude prices,” said Bipan Rai, director of foreign-exchange strategy in Toronto at Canadian Imperial Bank of Commerce’s CIBC World Markets unit.

G-20 ministers are also set to meet in Shanghai this week, potentially reassuring markets further. Among the topics for discussion will be how to coordinate existing resources, such as individual countries’ foreign-exchange reserves, officials familiar with the talks said.

“They won’t save the world, but probably convince investors that global policy makers are sufficiently on the same page to add to global confidence,” Steven Englander, Citigroup’s New York-based global head of Group-of-10 currency strategy, said in an e-mailed note. “I doubt this is enough for a major risk rally, but it could reduce some of the downside tail risk.”

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