Commodity Exporters' Currencies Slump as Rout in Oil Deepens

  • Aussie, real, krone post losses on raw-materials slump
  • Euro rises against peers as ECB seeks to limit stimulus bets

Currencies of commodity-exporting nations slumped as oil and iron ore prices tumbled.

Australia’s dollar extended its biggest weekly slide since September, while Brazil’s real, Norway’s krone and Mexico’s peso also fell. Brent crude’s decline to the lowest level since 2008 extended a drop that was sparked by the Organization of Petroleum Exporting Countries’ decision not to curb output at its Dec. 4 meeting.

"You’ve clearly got the energy-based commodity currencies weakening," said Peter Frank, global head of Group-of-10 and Asia FX strategy at Banco Bilbao Vizcaya Argentaria SA, by phone from London. "The slump to post-crisis lows in crude oil prices today is adding to the pain seen from the failure of OPEC to constrain supply, and so this is a classic terms-of-trade hit."

Australia’s dollar weakened 1.3 percent to 71.89 U.S. cents as of 5 p.m. New York time, pushing its slide this week to 2 percent. The real fell 1.6 percent, the krone dropped 0.5 percent and Mexico’s peso declined 1.2 percent.

The Bloomberg Commodity Index tumbled this week to its lowest level since 1999.

OPEC Decision

“In the aftermath of the OPEC decision, we’ve seen a significant decline in the oil price and this clearly weighs on the commodity currencies,” said Roberto Mialich, a senior foreign-exchange strategist at UniCredit SpA in Milan.

The Bloomberg Dollar Spot Index, which tracks the greenback versus 10 peers, ended the day little changed at 1,225.87.

Anticipation of a Federal Reserve interest-rate increase next week is also adding to risk aversion in the commodity-currency markets, Frank said.

"It’s going to be very difficult for these commodity currencies in the high-beta currency to recover until the Fed has done its hike and mapped out its year-ahead timing profile next week," he said.

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