Commodity currencies down despite Opec+ output deal

Tokyo

COMMODITY currencies slipped against their safe-haven rivals such as the dollar and yen on Monday as a record output cut agreed by Opec and other oil producing nations failed to offset broader concerns about slumping global demand.

The greenback drifted higher against its Australian and New Zealand counterparts, widely seen as barometers for market risk, in a sign that investors remain concerned about the consumption outlook for commodities. Financial markets remain on edge over the spread of the novel coronavirus as severe restrictions on personal movement drag the global economy into a deep recession.

Against the Canadian dollar, the US currency held steady at C$1.3945.

Major oil producers agreed to the output cuts on Sunday to prop up oil markets as the pandemic severely curtailed global demand.

Oil prices had gone into freefall on worries about the virus and a price war between Saudi Arabia and Russia, which was seen straining the budgets of oil producers and hammering the US shale industry.

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Currencies from Norway, Mexico, and Canada - all major oil producers - got a boost on Friday as the agreement to cut output began to take shape, but these gains disappeared on Monday as investors avoided risk assets.

While oil futures erased early losses to trade higher, moves in currencies highlighted investor trepidation over the prevailing uncertainty in markets.

Other currency traders pointed to a decline in US stock futures as a supportive factor for risk-off trades.

The cautious mood boosted the yen, which is often sought as a safe-haven during times of market and economic stress because of Japan's current account surplus. The yen rose 0.62 per cent to 107.83 per dollar on Monday and jumped more than 0.5 per cent against the Australian and New Zealand currencies.

In the onshore market, the yuan eased slightly to 7.0465 per dollar after officials reported a rise in Covid-19 cases on the Chinese mainland.

Against the safe-haven Swiss franc, the greenback held steady at 0.9644. The dollar edged up to US$1.0950 per euro.

Further declines in the dollar may be limited with speculative net short positions in the US currency having risen to their highest since May 2018, according to calculations by Reuters and US Commodity Futures Trading Commission data.

The Australian dollar erased early losses to trade at US$0.6348. The New Zealand dollar fell 0.16 per cent to US$0.6081 as investors shunned risky trades.

The pound rose 0.3 per cent to US$1.2509 and last fetched 87.57 pence per euro.

Sterling retained gains made after Prime Minister Boris Johnson left hospital for treatment of Covid-19. REUTERS