Oil drop weighs on commodity currencies

[WELLINGTON] Crude oil fell for a second day, extending declines below US$40 a barrel as the dollar reasserted itself following last week's selloff and data showed the first increase this year in the number of US rigs.

West Texas Intermediate oil neared US$39, after its retreat on Friday with industrial metals knocked the Bloomberg Commodity Index from a three-month high.

The New Zealand dollar weakened with Canada's currency and Australia's dollar flirted with a a second day of declines after the greenback snapped a slump Friday that was sparked by the Federal Reserve paring its interest-rate outlook for 2016.

Shares in Sydney fluctuated as futures in Hong Kong and Korea signaled gains. Markets in Japan are closed on Monday for a holiday.

More than US$4 trillion has been added to the value of global equities this month as stimulus efforts from central banks couple with an oil-driven rally in commodities to burnish investor sentiment.

The Standard & Poor's 500 Index returned to levels last seen at the end of 2015 on Friday, erasing its worst ever start to a year, while signs policy makers will continue to support economies with unprecedented easing helped propel developing-country stocks more than 20 per cent higher from a low reached in January.

China said Friday it will loosen controls around margin trading, a sign concern over stock-market volatility there has faded.

"The policy actions among major global central banks over the past three weeks certainly appears to be coordinated and has helped ease fears about weakening global activity and its contagion into risk assets," Matthew Sherwood, head of investment strategy at Perpetual Ltd in Sydney, which manages about US$21 billion, said in an e-mail to clients. "However, investors need to be cautious not to extrapolate recent returns, and the speed of the market recovery, indefinitely into market returns from here."

China reports on commodity imports Monday, and Taiwan updates export data. New Zealand posts figures on credit-card spending and Hong Kong reports on consumer prices.

BLOOMBERG