Currencies Fall as OPEC Cuts Disappoint
Asian currencies remain subdued in forex, following Easter Monday holidays in key markets excluding Japan and China. Lack of major/events on the economic calendar also contributed to the market’s inactivity.
Nevertheless, the US dollar pulls back amid the coronavirus-led risk-off. Gold fails to benefit from the risk aversion, which could be due to the greenback recovery.
The dollar was up 0.63% against the Norwegian crown to 10.25 and 0.51% to 23.45 Mexican pesos. Against the Canadian dollar, the U.S. currency was steady at C$1.3956.
Further, WTI’s latest recovery still fails to justify OPEC+ production cut. The market compares it with initial expectations of about 20 million barrels a day of cuts.
Commodity currencies fell as OPEC+ output cuts have failed to allay the demand anxiety.
The coronavirus has so far resulted in 114,000 deaths and above 1.8 million cases, on a global basis. For the US, the numbers of cases have crossed the 556,000 mark, while the death toll rose to 22,073.
In China, the strength of the virus has receded while South Korea also marked new cases to a seven-week low.
EUR/USD declined as USD bounced but GBP/USD gained from UK PM Johnson’s exit from the hospital. Moreover, USD/JPY dropped while USD/CAD and USD/CHF stayed mostly unchanged.
The greenback drifted higher against AUD and NZD, widely seen as barometers for market risk. It’s a sign investors remain concerned about the consumption outlook for commodities.
Severe restrictions on personal movement or lockdowns make FX markets remain on edge.
The Currencies Movement
Daiwa Securities Yukio Ishizuki said the decline in oil demand is well ahead of the output cuts that were agreed. This is a negative for oil producers and also encourages risk-off trading, which should support the yen, Ishizuki added.
Trading remained on the dull side as financial markets in Australia and New Zealand were closed for Easter Monday. Hong Kong and Britain were also closed for the holiday.
Major oil producers have agreed to the output cuts on Sunday. This is in order to prop up oil markets as the pandemic severely curtailed global demand.
Oil prices had gone into freefall amid worries about the virus and a price war between Saudi Arabia and Russia. It was seen straining the budgets of oil producers and hammering the U.S. shale industry.
Currencies from major oil producers, Norway, Mexico, and Canada gained on Friday as the agreement to cut output took shape. However, these gains disappeared on Monday as investors avoided risk assets.
Oil futures cleared early losses to trade higher in Asia. Forex trading highlighted investor trepidation over the prevailing uncertainty in markets.
According to currency traders, the decline in U.S. stock futures is a supportive factor for risk-off trades.
