Dollar struggles as rising oil prices lift commodity currencies

London

A JUMP in oil prices lifted commodity currencies such as the Norwegian kroner and the Canadian dollar against the US dollar on Monday as optimism about a reopening of economies stifled by the novel coronavirus pandemic boosted risk appetite.

The gradual easing of lockdowns has raised hope across global markets, despite fresh trade tensions between the United States and China, though traders were wary of taking big bets before more data are revealed this week.

"The surge in oil prices will also provide a selective opportunity to sell the US dollar against oil-sensitive major currencies," wrote Stephen Innes, chief global markets strategist at AxiCorp.

The Norwegian kroner was lifted by rising oil prices, supported by output cuts and signs of a recovery in demand.

Against the dollar, Norway's kroner rose more than one per cent to 10.0821. The Canadian dollar rose 0.52 per cent to $1.4036.

Other commodity currencies also rose and gold gained more than 0.7 per cent, hovering across its highest in over seven years.

The dollar index, which posted gains of about 0.6 per cent last week, gradually gave up early gains and was down 0.12 per cent at US$100.25.

US Federal Reserve chairman Jerome Powell's willingness to print more dollars and extend the monetary stimulus further to fight the novel coronavirus economic crisis was welcomed by investors.

Bets against the US dollar shrank to the smallest position in seven weeks in the latest week, according to calculations by Reuters and US Commodity Futures Trading Commission data released on Friday.

Gains in stocks also lifted other major currencies, such as the Australian dollar, which was up half a per cent at US$0.6446. The euro fell 0.1 per cent to US$1.0806.

Against the yen, the US currency fell about 0.25 per cent to 107.30 per dollar after data showed that Japan slipped into recession for the first time since 2015.

Policymakers are bracing for the nation's worst post-war slump.

Investors were also looking to Purchasing Managers' Index surveys due from major economies later this week for the next insight into the outlook.

The pound took back some ground lost earlier against the euro and was trading at 89.08 pence after a week-long deadlock over a post-Brexit trade deal with the European Union.

Money markets also ramped up expectations of negative interest rates in the United Kingdom for the first time ever as policymakers debated further steps to support the struggling British economy. REUTERS