Dollar sags as commodity currencies draw support from crude oil surge

By: | Published: April 9, 2019 6:16 AM

The dollar sagged on Tuesday after weak U.S. economic data while commodity-linked currencies such as the Canadian and Australian dollars drew support from an ongoing surge in crude oil prices.

Dollar sags as commodity currencies draw support from crude oil surgeDollar sags as commodity currencies draw support from crude oil surge

The dollar sagged on Tuesday after weak U.S. economic data while commodity-linked currencies such as the Canadian and Australian dollars drew support from an ongoing surge in crude oil prices. The dollar index against a basket of six major currencies stood little changed at 97.083 after losing 0.35 percent the previous day, marking its biggest daily decline since March 20. In addition to pressure from buoyant commodity-linked currencies, the dollar was weighed by data showing U.S. durable goods orders declined in February and as the euro bounced as investors squared positions ahead of an upcoming European Central Bank meeting.

“The dollar’s strength peaked out towards the end of last week, when the U.S. jobs data showed that wage increases had slowed. The currency hasn’t been able to find traction since,” said Shin Kadota, senior strategist at Barclays in Tokyo. “And the latest bounce in U.S. yields did not provide much lift for the dollar as they still remain at low levels in absolute terms.”

The 10-year Treasury yield bounced overnight to 2.518 percent, edging further away from a 15-month low of 2.34 percent plumbed at the end of March. The yield was still significantly below its recent highs around 2.8 percent hit in early March. The Canadian dollar was little changed at C$1.3314 per dollar after gaining more than 0.5 percent overnight. The Australian dollar was steady at $0.7121 after rising 0.3 percent the previous day.

Oil prices have surged to five-month highs on expectations that global supplies would tighten due to fighting in Libya, OPEC-led cuts and U.S. sanctions against Iran and Venezuela. The euro was effectively flat at $1.1256 after advancing 0.4 percent on Monday, when it ended a two-day losing streak. The pound was unchanged at $1.3062, having traded in a narrow range so far this week, reflecting nervousness in the market about key Brexit talks between Prime Minister Theresa May and the opposition Labour Party.

Britain is due to leave the European Union on Friday but May is seeking a compromise with the Labour Party regarding terms for Brexit ahead of an EU leaders’ summit on Wednesday. May heads to Berlin and Paris on Tuesday to meet Chancellor Angela Merkel and President Emmanuel Macron before setting out the case for another delay at Wednesday’s EU summit in Brussels. The dollar was a shade weaker at 111.455 yen after shedding 0.2 percent the previous day to put additional distance between a three-week peak of 111.825 scaled on Friday.

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