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Commodity currencies back in business as dollar dips

David Hobart

Those global currencies dependent on commodity exports were up in the forex markets on Monday – leaving little room for the dollar to surge.

It came as oil prices across the globe were up across the course of the day.

The consequent rise in risk appetite that this led to was increased as the markets seemed to hold their optimistic view of the economic effects that eased lockdowns around the world are having.

One of the winners over the course of the day was the Norwegian crown, which was up by over a percentage point in its pair against the US dollar.

It was seen at 10.0821 in this pair, and this rise was largely a product of the oil price shooting up.

Closer to home for the US dollar, meanwhile, the Canadian dollar also saw a rise due to oil prices going up so rapidly.

It was spotted up by over half a percentage point at one stage against the US dollar, reaching 1.4036 in the main North American pair.

Elsewhere around the world, the Japanese yen – which in the pre-pandemic age was known for being a safe-haven currency flocked to in times of turmoil – was down by around a quarter of a percentage point, reaching 107.30 at one stage.

The Japanese economy has, like many economies, taken a real beating during the coronavirus pandemic.

It is now expected that the country will face its worst economic period since the end of the Second World War.

For the US dollar itself, the dollar index – an artificial tool utilised by traders to gain an insight into how the dollar is performing comparatively to other currencies around the world – was dipping.

It was down by around 0.12% at one stage over the course of the day, and was noted at 100.25.

This was a departure from its strong performance last week, where it saw gains across the course of the week of around 0.6%.

In Britain, meanwhile, the pound managed to rise slightly in its pair with the single European currency.

It was spotted up somewhat at 89.08 at one point.

In recent days, it has been struggling due to question marks over if and when Britain will be able to finally disentangle itself from the EU.

While the country has officially left the bloc, it remains tied to the EU in some ways until the end of 2021 – by which time a trade deal is due to have been signed.

Britain was also in the spotlight over claims that the Bank of England may be considering the introduction of negative interest rates in an attempt to stimulate and help the country’s economy.

Money markets appear to be beginning to make the assumption that this is on the cards, though nothing is yet confirmed.

Negative interest rates have been tried in a number of other economies around the world, including Japan, and speculation that the Bank of England was considering it began in earnest at the weekend.

 

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David Hobart
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