Commodity currencies got off to a shaky start on Friday, having tracked oil prices lower, after a meeting of OPEC countries disappointed some investors who had hoped for larger production cuts. Sterling slipped after an opinion poll showed that Britain’s opposition Labour Party has cut the lead of Prime Minister Theresa May’s Conservatives to five points ahead of a June 8 national election.
The pound fell 0.3 percent to $1.2908. That added to the 0.3 percent loss on Thursday, after data showed Britain’s economy slowed more than previously thought in the first quarter of the year. Commodity-linked currencies struggled to gain traction after having taken a hit overnight from a tumble in oil prices.
OPEC and non-members led by Russia decided on Thursday to extend cuts in oil output by nine months to March 2018 as they battle a global glut of crude after seeing prices halve and revenues drop sharply in the past three years. But oil prices tumbled 5 percent on Thursday as the outcome disappointed some investors who had been hoping for deeper production cuts or a further extension.
The Canadian dollar was last trading at C$1.3484 per U.S. dollar, down from a five-week high of C$1.3388 touched at one point on Thursday. The Australian dollar eased 0.1 percent to $0.7447, staying on the defensive after shedding 0.7 percent on Thursday.
The weakness in commodity currencies gave some respite to the U.S. dollar, which has been on the defensive after the Federal Reserve’s minutes of the May policy meeting released on Wednesday dialled down on some of the more hawkish policy expectations in the market.
The greenback’s underlying trend doesn’t look very strong, however, said Satoshi Okagawa, senior global markets analyst at Sumitomo Mitsui Banking Corporation in Singapore.
Okagawa said that one message from the Fed minutes was that the U.S. central bank is likely to take a gradual and flexible approach to reducing its balance sheet. “That has helped U.S. yields to settle down and has led to weakness in the dollar,” he added. The dollar index, which measures the greenback against a basket of six major rivals, last traded at 97.307.
On Monday, the dollar index had touched a low of 96.797, its lowest level since Nov. 9. For the week, the dollar index was clinging to a gain of about 0.2 percent.
The greenback has been bruised recently by uncertainty about U.S. economic policies. Markets worried that the political uproar in the wake of U.S. President Donald Trump’s firing of James Comey as FBI director could delay efforts by Trump to implement his plans for pro-growth tax reforms.
Against the yen, the dollar eased 0.1 percent to 111.74 yen , staying below a one-week high of 112.13 yen touched on Wednesday. The euro eased 0.1 percent to $1.1199, having backed away from a 6-1/2 month high of $1.1268 set this week.
The common currency has enjoyed a bull run this month on factors including an ebb in French political concerns and upbeat euro zone data.