US dollar surges, oil-linked currencies fall
London
THE US dollar rose on Tuesday against most major currencies as investors sought a safe haven after a plunge in oil prices a day earlier.
US crude oil futures moved into negative territory for the first time on Monday, as a sharp fall in global fuel use due to the novel coronavirus pandemic creates a supply glut and a shortage of storage capacity.
Oil-linked currencies such as the Norwegian krone and the Canadian dollar were Tuesday's worst-performing currencies, along with the Swedish krona, which is very sensitive to global economic stability.
"Today's price falls, and the associated sell-off in oil-linked currencies such as CAD and NOK, suggests market participants are bracing for a deeper and longer (oil) supply glut," said Ranko Berich, head of market analysis at Monex Europe.
The Norwegian krone fell to a near one-month low of 10.6620 against the US dollar and was last down 2.2 per cent on the day . The Canadian dollar fell to a three-week low of US$1.4265, and was trading last down 0.5 per cent.
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But with Norway's central bank buying two billion kroner (S$269 million) per day in April to prevent the krone weakening further, the currency remains somewhat supported on the demand side, analysts said.
The Swedish krona was down 0.5 per cent at 10.08.
A considerable decline was seen in the pound, too, as investors offloaded British assets to raise cash to cover losses resulting from the oil price collapse, according to Kenneth Broux, head of corporate research at Societe Generale.
"Potentially investors have to liquidate some of the positions they have just to cover the losses," he said, adding that because of Britain's current account deficit, sterling seemed an obvious choice.
Sterling was last down 0.7 per cent at US$1.2344, having fallen earlier to a two-week low of US$1.2315.
The mood among German investors improved in April as concerns about the impact of the coronavirus pandemic on Europe's largest economy seemed to have eased, a survey showed on Tuesday.
That left no trace on the euro, however, which was last down 0.4 per cent at US$1.0827.
"The euro is suffering as markets contemplate the increased borrowing that will be necessary to fund the recovery" from Covid-19, said Marshall Gittler, analyst at broker BDSwiss.
European countries have been issuing debt to support their locked-down economies. REUTERS
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