Commodity Currencies Lead Gains This Week as Oil Extends Rebound

Oil Market Much More Balanced By Year-End: EIA Chief
  • ‘Rebound in oil is leading the way,’ Mizuho Bank’s Jones says
  • Aussie unlikely to drop below 76 cents: Westpac’s Speizer

Currencies of commodity-exporting nations such as Norway and Canada led gains over the past five days as oil heads for the biggest weekly advance since April while speculation builds that the Federal Reserve will be slow to raise interest rates.

The krone has risen the most among developed-market peers since Aug. 5 while the loonie is headed for the biggest weekly gain since April as crude futures extended their rebound after slipping into a bear market earlier this month.

Record highs reached by U.S. stock markets Thursday signal a revival in risk appetite that has buoyed higher-yielding currencies such as the Aussie and kiwi. A gauge of the dollar has erased all its advance from last week, after better-than-forecast payrolls growth failed to strengthen bets for higher U.S. rates by year-end above 50 percent.

“The rebound in oil is leading the way, pushing other commodities up in tandem, and that is positive for commodity currencies,” said Neil Jones, head of hedge-fund sales at Mizuho Bank Ltd. in London. “Demand for these currencies is likely to remain firm given central banks continue to push on the stimulus button.”

The krone strengthened 0.3 percent to 8.2265 per dollar as of 7:28 a.m. in New York, taking its weekly advance to 3.4 percent, the most since October. It appreciated 2.9 percent in the week to 9.1709 to the euro. The loonie added 0.1 percent to C$1.2980 versus its U.S. peer, climbing 1.5 percent since Aug. 5.

Over the past week, Australia’s dollar has risen 0.7 percent to 76.75 U.S. cents, while the kiwi has climbed 0.7 percent to 71.94 U.S. cents. The Aussie and kiwi slipped Friday as data from China, the South Pacific nations’ biggest trading partner, showed factory output, retail sales and investment slowed.

While the data were “disappointing,” the Aussie is unlikely to weaken below 76 cents as “global demand for the Australian dollar is still strong,” said Imre Speizer, a market strategist at Westpac Banking Corp. in Auckland.

The Bloomberg Dollar Spot Index was little changed, and has declined 0.6 percent this week, while the greenback weakened 0.6 percent to $1.1151 per euro and gained 0.3 percent to 102.11 yen.

West Texas Intermediate crude oil for September delivery has jumped 3.6 percent this week to $43.31. Talks with oil producers in Algiers next month could include action to stabilize the market, Saudi Arabia’s energy minister said, according to Reuters.

Futures signal 49 percent probability the Fed will raise rates by year-end, according to data compiled by Bloomberg.

Before it's here, it's on the Bloomberg Terminal. LEARN MORE