Dollar Weakens as Commodity-Exporter Currencies Rally With Oil

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  • Bloomberg's index of the greenback falls for second day
  • New Zealand, Canada, Australia's currencies gain with crude

Is the Dip in the Dollar Really Over?

The dollar fell for a second day as a rally in oil bolstered currencies of commodity-exporting nations.

The greenback declined against most of its major peers as a government report showed U.S. crude inventories unexpectedly declined. Currencies of New Zealand and Canada moved higher against the dollar as West Texas Intermediate crude climbed above $46 a barrel, and the Bloomberg Commodity Index advanced.

The dollar sank after gaining 1.5 percent last week, an advance some saw as evidence of a building rebound following three months of losses. Natural-resource-linked currencies have advanced during the past three months as oil has gained after a precipitous slide to less than $30 in January from almost $116 per barrel in mid-2014.

“Commodity currencies are doing quite well against the dollar,” said Richard Franulovich, a senior currency strategist at Westpac Banking Corp. in New York. “The Energy Information Administration inventory data was quite constructive, and U.S. energy production is falling, so oil prices have caught a bid and commodity currencies are holding up.”

The Bloomberg Dollar Spot Index, which tracks the greenback versus 10 peers, fell 0.4 percent was of 5 p.m. in New York, the biggest daily drop on a closing basis since April 29. The U.S. currency fell 0.8 percent to 108.41 yen, and lost 0.5 percent to $1.1426 per euro.

Crude stockpiles fell 3.41 million barrels last week, the Energy Information Administration said. Analysts surveyed by Bloomberg had projected a 750,000-barrel gain. Crude output fell to 8.8 million barrels a day, the lowest since September 2014.

The Aussie rose 0.4 percent to 73.90 U.S. cents, while Canada’s loonie strengthened 0.6 percent to C$1.2836 per greenback. The New Zealand dollar advanced 1.2 percent, while the South African rand and Brazilian real also rallied.

The dollar’s two-day drop may be halted by upcoming economic releases, Franulovich said, as strong economic reports during the next two weeks may underpin the currency.

The greenback is forecast to strengthen to $1.11 per euro and 115 yen by year-end, according to median estimates in Bloomberg surveys of analysts.