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FOREX-Commodity currencies firm after OPEC oil curb agreement

Published 29/09/2016, 10:39 am
© Reuters.  FOREX-Commodity currencies firm after OPEC oil curb agreement
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* Commodity currencies benefit from OPEC output cut deal

* But questions remain on how to cut production

* Euro little changed, eyes on German inflation

By Hideyuki Sano

TOKYO, Sept 29 (Reuters) - Commodity-linked currencies held firm on Thursday after OPEC agreed to cut oil output in the first such deal since 2008, boosting oil prices sharply.

The Organization of the Petroleum Exporting Countries would reduce output to a range of 32.5-33.0 million barrels per day, a reduction of 0.7-2.2 percent from OPEC estimates of its current output at 33.24 million bpd. lifted oil prices, with international benchmark Brent futures LCOc1 posting their biggest gains in 2 1/2 months to hit a three-week high of $48.96 per barrel.

The Canadian economy, which depends heavily on oil exports, saw its currency pull ahead. The Canadian dollar CAD=D4 climbed to C$1.3068 against the U.S. unit, after having risen 0.9 percent, its biggest daily gain in a month, on Wednesday.

The Norwegian crown was a clear winner, hitting a near five-month high of 8.0222 to the dollar NOK=D3 and 14-month high of 9.0085 per euro EURNOK=R .

The Australian dollar AUD=D4 also hit a three-week high of $0.7696, as the country exports various natural resources even though it is a net importer of oil.

Still, some analysts cautioned that the oil-cut deal is leaving crucial details on how much each country will produce to be decided at the next formal OPEC meeting in November, when an invitation to join cuts could also be extended to non-OPEC countries such as Russia.

"It could be that everyone is thinking that they don't cut output themselves," said Daisuke Uno, chief strategist at Sumitomo Mitsui Bank.

"I think the markets are still not fully convinced," he added.

The dollar rose a tad against the yen to 100.92 yen JPY= , edging up from one-month low of 100.085 touched on Tuesday, supported by oil-led recovery in share prices.

The euro EUR= was little changed at $1.1222, recovering from Wednesday's low of $1.1182 in part helped by rebound in shares of Deutsche Bank DBKGn.DE .

The currency is trading near the middle of its narrow triangle holding pattern since August.

In the short-term, German inflation data could help the currency if it shows a rise in consumer prices as expected, said Masafumi Yamamoto, chief FX strategist at Mizuho Securities.

German annual inflation is expected to rise to 0.5 percent in September from 0.3 percent in August.

"German inflation has been recovering after hitting a bottom of minus 0.3 percent in April. If we see a number in line with market expectations, that could dampen expectations of further momentary easing by the European Central Bank in December," he said.

(Editing by Shri Navaratnam)

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