Commodity-Exporter Currencies Hold Gains With Crude Oil's Bounce

  • Loonie, Aussie and rand climbed Tuesday as commodities rose
  • Chinese growth concern drove earlier plunges to historic lows

The currencies of commodity-exporting nations held gains after raw-material prices rebounded, providing a respite from this month’s selloff.

The Canadian dollar and South African rand rose about 1 percent on Tuesday as prices for crude oil, metals and agricultural commodities gained. The currencies had advanced amid a broader climb for natural-resource exporters against the U.S. dollar in the previous five days.

“The key driver for commodity currencies today is that oil is up 3 to 4 percent,” Ian Gordon, a foreign-exchange strategist at Bank of America Corp. in New York, said Tuesday. “Equities are also higher, which is also providing a boost to these currencies.”

The currencies of commodity exporters have shown signs of arresting declines during the past week after plunging this month on concern that Chinese economic growth is slowing, damping the outlook for demand from world’s the second-largest economy. Canada’s currency stabilized after reaching an almost 13-year low last week, while the South African rand and Mexican peso have climbed from records this month.

The Canadian dollar was little changed at C$1.4126 per greenback as of 8:15 a.m. in Tokyo on Wednesday, after jumping 1.2 percent in New York. South Africa’s rand advanced 0.9 percent on Tuesday, while Norway’s krone increased 0.7 percent. The Bloomberg Commodity Index rose 1.4 percent on Tuesday, reaching the highest level on an closing basis since Jan. 8.

Australia’s dollar was little changed at 69.97 U.S. cents on Wednesday, after rising 0.7 percent the previous day. New Zealand’s currency was unchanged at 64.99 cents.

“The Canadian dollar is our biggest gainer by far, with a big boost from oil,” said Greg Anderson, global head of foreign-exchange strategy in New York at Bank of Montreal. The loonie, as the Canadian dollar is known for the image of the aquatic bird on the C$1 coin, and its peers are benefiting from a greater appetite for risky assets.

The bounce follows a selloff this month in which traders got “carried away,” said Matt Weller, an analyst at Gain Capital Holdings Inc.’s unit in Grand Rapids, Michigan.

“It all comes down to risk sentiment,” Weller said on Tuesday. “We see the central arbiter of risk, oil, on the rise today, back up toward that $32 a barrel level. As a result, we see that spilling over to the loonie” and the Australian and New Zealand dollars, he said.

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