Currencies of major commodity producers such as Australia and Canada steadied on Wednesday, letting them nurse big losses suffered in the past two days from a selloff in oil and bulk commodities.
Most of the action this week has been confined to commodity currencies after OPEC members had failed on Friday to agree on an oil production ceiling, triggering a renewed selloff in oil.
The slide in commodities has dampened investors’ risk appetites, lending some support to low-yielding funding currencies such as the euro and the yen this week, although their moves have been relatively modest.
The euro last traded at $1.0901, up 0.1 per cent on the day, having pulled up from Tuesday's low around $1.0830.
“Every time we see risk aversion, we see the market paring back short euro positions, short yen positions,’’ said Jesper Bargmann, head of trading for Nordea Bank in Singapore, adding that any weakness in European equities could trigger such short-covering in the euro.
Still, the euro’s moves this week have been very mild compared with last Thursday’s 3.1 per cent surge after the European Central Bank disappointed with a modest easing.
The dollar eased 0.1 per cent against the yen to 122.77 yen, having pulled back from Tuesday’s high near 123.40 yen.
“The main focus for markets remained oil prices and equities, with the CRB index hitting fresh 13-year lows overnight and oil prices touching seven-year lows,’’ analysts at ANZ wrote in a note to clients, referring to the Thomson Reuters/CoreCommodities CRB index.
Commodity currencies
Commodity currencies gained a bit of respite on Wednesday as oil prices edged higher, although the Canadian dollar and Norwegian crown were still wallowing near their lowest levels in over 10 years against the greenback.
The US dollar was last at C$1.3575, having risen on Tuesday to as high as C$1.3623, the weakest level for the Canadian dollar since mid-2004.
Against the Norwegian crown, the greenback last stood at 8.7486 crowns, having scaled a 13-year peak of 8.8194 crowns on Tuesday.
The Australian dollar held steady at $0.7215. There was limited reaction to data showing China's consumer inflation picked up slightly in November.
The New Zealand dollar slipped 0.2 per cent to $0.6628. Uncertainty over whether the Reserve Bank of New Zealand would cut interest rates on Thursday has kept investors wary.