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FOREX-Dollar benefits as commodity currencies slide on oil spill

Published 08/12/2015, 10:48 am
Updated 08/12/2015, 10:50 am
© Reuters.  FOREX-Dollar benefits as commodity currencies slide on oil spill
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* Dollar hovers at 11-year highs against Canadian dollar

* Norwegian crown also hit hard as oil tumbles

* Chinese trade data up next

By Ian Chua

SYDNEY, Dec 8 (Reuters) - The U.S. dollar was broadly firmer early on Tuesday and at decade-highs against its Canadian peer, which along with the Norwegian crown slid sharply on the back of a tumble in oil prices.

The greenback jumped to C$1.3524, reaching a high not seen since mid-2004. It was last at C$1.3506. Against the crown, it rallied more than 1.5 percent to 8.6786. The euro also hit a one-month high of 9.4103 crowns.

OPEC's inability to agree on a production ceiling last Friday meant that supply will continue to depress oil prices. The decision gave investors the green light to sell crude and currencies of oil exporters like Canada and Norway.

Crude oil futures tumbled 6 percent on Monday to their lowest in nearly six years.

"The decline in oil prices... will not be a one-night trade. Anticipate further downward pressure on oil prices, bond yields and commodity currencies," said Richard Grace, chief currency and rates strategist at Commonwealth Bank.

"With no major U.S. economic data until U.S. retail sales on Friday, commodity price themes will drive trading this week."

Indeed, commodity prices could come under further pressure if a flood of Chinese data this week reinforces worries about slower growth in the world's second-biggest economy.

Chinese trade data due later in the day is followed by inflation on Wednesday and industrial output and retail sales on Saturday.

The resultant demand for the U.S. dollar helped lift it against other currencies as well. The euro dipped to $1.0833, continuing to pull back from Thursday's high of $1.0981 EUR= . Yet, it remained well above last week's trough of $1.0523.

After the vicious short squeeze sparked by disappointment over the European Central Bank's modest easing measures, investors are wary about quickly re-establishing bearish euro positions.

The New Zealand dollar was among the worst performers and has slid back to $0.6644 NZD=D4 from a one-month peak of $0.6787 set on Friday.

Investors appeared to be taking some profits in the lead up to an interest rate decision by the Reserve Bank of New Zealand on Thursday.

Markets are in two minds about whether the central bank will deliver its fourth rate cut this year, though the vast majority of analysts are tipping an easing.

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