Monday, 06 December 2021 06:31 GMT

Oil price rise underpins Canadian dollar, greenback eases

(MENAFN- Trend News Agency ) The dollar eased against a basket of currencies on Wednesday, while commodity-linked currencies such as the Canadian dollar were underpinned by this week's rally in oil prices, reports.

Oil prices had surged to 2-1/2 year highs on Tuesday, boosted by news of an explosion on a Libyan crude pipeline as well as voluntary OPEC-led supply cuts.

That helped lend support to the currencies of commodity exporting countries, with the Canadian dollar touching a high of C$1.2678 at one point, its highest level since Dec. 6.

Similarly, the Australian dollar rose 0.2 percent to $0.7746, reaching its highest level in two months.

The U.S. dollar eased 0.1 percent against a basket of six major currencies to 93.188.

Moves among major currencies were subdued, with the euro inching up 0.2 percent to $1.1876. The dollar held steady against the yen at 113.19 yen.

Monetary policy convergence could weigh on the dollar next year, now that central banks other than the U.S. Federal Reserve have either begun moving away from monetary stimulus, or started to raise interest rates, said Peter Chia, FX strategist for United Overseas Bank in Singapore.

Against this backdrop, Japanese policymakers may at least start dropping more hints about an eventual tightening of the Bank of Japan's monetary policy, Chia said, adding that the dollar could slip to 108 yen by the end of March.

'I think that policymakers in Japan want to prepare markets way ahead for some policy change... The signaling process could be on a higher intensity next year,' he said, adding that actual BOJ policy tightening might only occur in 2019.

A speech by BOJ Governor Haruhiko Kuroda in November had stirred speculation that the BOJ could edge away from crisis-mode stimulus earlier than expected. That was when he mentioned the concept of a 'reversal rate' - a level at which low interest rates start to have more harmful side-effects than benefits.

Kuroda, however, said last week after the BOJ kept policy steady that economic improvements alone would not trigger a withdrawal of stimulus, reinforcing expectations that the BOJ was in no hurry to move away from its ultra-loose monetary policy.

Bitcoin rose 3.2 percent to about $16,270 on the Luxembourg-based Bitstamp exchange. Bitcoin is up about 14 percent so far this week, having regained some footing after sliding 25 percent last week, its biggest weekly drop since 2013.


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