Oil-linked currencies plummeted down on Tuesday. This was after the U.S. crude oil futures collapsed into negative territory for the first time on Monday. The Norwegian crown and the Canadian dollar suffered the most, along with the Swedish crown, which is very sensitive to global economic stability.
The Norwegian crown fell by 0.7% at 10.51 against the dollar. While the Canadian dollar declined by 0.4% to 1.4211 against the greenback, sliding to a two-week low. The Swedish crown also tumbled down by 0.5% at 10.07.
Factory closures and travel curbs enforced to slow the pace of the virus’s spread caused supply glut and sagging demand for oil. That, on the other hand, became the reason for the recent plunge in oil prices.
U.S. West Texas Intermediate crude for May delivery was trading -$2.51 per barrel on Monday. Off a low of minus $40 hit in New York trading. Though the prices edged up into positive territory early Tuesday, this is drawing money from the risk assets, commodity currencies among them, to the safety of dollar-denominated assets.
The May contract expires on Tuesday, and the more actively traded June contract is down at $20.27 a barrel. Shane Oliver, the head of the investment strategy at AMP Capital Investors in Sydney, stated that while oil is off its lows, a lot of companies are going to get hit, and they could start to fail.
What about the U.S. dollar and Euro?
The dollar soared on Tuesday against most major currencies as traders sought a safe haven. But it dropped down against the Japanese yen by 0.2% at 107.40. The euro, on the other hand, fell by 0.3% at $1.0833.
Marshall Gittler, the analyst at broker BDSwiss, noted that the euro is suffering as markets contemplate the increased borrowing necessary to fund the recovery from COVID-19. European countries have been issuing debt to support their economies, which have collapsed due to the lockdowns.
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