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Oil Producer’s Currencies Are Collapsing As Brent Breaks Below $40
Oil Producer’s Currencies Are Collapsing As Brent Breaks Below $40
Just when traders thought the bottom was in…
As Reuters notes, with lower oil prices likely to add to global deflationary concern and Chinese data doing little to improve sentiment, risk appetite remained fragile.
The Canadian currency fell 0.4 percent against the U.S. dollar, to C$1.3555. That was the U.S. dollar’s strongest level since mid-2004.Similarly the Norwegian crown fell a six-week low against the euro.
“If you are looking to play weak oil prices, you would want to sell the Canadian dollar and the Norwegian crown,” said Jeremy Stretch, head of currency strategy at CIBC World Markets. “With oil prices falling and some even talking about oil falling to $30 a barrel, revenues for these countries will take a beating and hence their currencies will remain under pressure.”
The Australian dollar fell 0.6 percent to $0.7220 AUD=D4 as this week’s tumble in iron ore and the latest Chinese data weighted on the currency’s woes.
Citi recommended that investors sell the Aussie through options. “The weakness in the Chinese economy will spill over to Australia through commodities demand as well as reduced demand for the Australian dollar via reserves and other channels. This should leave it vulnerable to an eventual leg higher in the dollar,” they said.
Charts: Bloomberg
With the oil price collapse accelerating (Brent just dropped below $40 for the first time since Feb 2009), the currencies of major oil-exporting nations – such as the Canadian dollar and Norwegian crown – are plunging…
Aussie Dollar Tests Long-Term Trendline As China Contagion Spreads
Aussie Dollar Tests Long-Term Trendline As China Contagion Spreads
Last week, we asked “Is Australia the next Greece?” It appears, judging bu the collapse in the Aussie Dollar, that some – if not all – are starting to believe it’s possible after last night’s 15-month low in China Manufacturing PMI. As UBS previously noted, China’s real GDP growth cycles have become an increasingly important driver of Australia’s nominal GDP growth this last decade. With iron ore and coal prices plumbing new record lows, a Chinese (real) economy firing on perhaps 1 cyclinder, and equity investors reeling from China’s collapse; perhaps the situation facing Australia is more like Greece than many want to admit.
Australian consumers are more worried about the medium term outlook than at the peak of the financial crisis, and rightfully so…
As China plumbs new depths in manufacturing, just piling on Aussie’s woes…
The Dollar is rising this morning but all eyes are on AUD as it tests a very long-term trendline…
h/t @RaoulGMI
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As The Telegraph previously concluded, rather ominously,
The problem is that Australia, after decades of effort to diversify, is looking ever more like a petrodollar economy of the Middle East, but without the vast horde of foreign currency reserves to fall back on when commodity prices fall.
Instead, Australians must borrow to maintain the standards of living that the country has become accustomed to, which even some Greeks will admit is unsustainable.
Charts: Bloomberg
