The U.S. dollar slid slightly on Wednesday after its rally in the previous day. However, the safe-haven currency remained in demand due to the plunge of oil prices. The dollar lowered by 0.2% against a basket of currencies. But it was still up roughly by 0.4% this week as investors sought safety amidst the market’s turmoil.
Meanwhile, the Japanese yen rose by 0.1% against the dollar, maintaining its gains from the past week. The euro also remained range-bound, trading at $1.08710 at the last measure. The investors are waiting for an EU meeting tomorrow to discuss financial aid in the eurozone.
After collapsing to a four year low, oil prices declined again in overnight trading on Wednesday. Brent dropped to its lowest level since 1999. This was because the demand for everything, from gasoline to jet fuel, lowered due to the coronavirus outbreak and lockdown measures enforced to contain it. As a result, U.S. crude oil futures turned negative on Monday for the first time in history.
Thu Lan Nguyen, the Commerzbank senior FX analyst, noted that the current distortions on the oil market are more likely to be the trigger for the market to reveal its worst fears regarding the economic extent of the pandemic crisis.
How did the oil-linked currencies fare?
Oil-linked currencies plummeted down on Tuesday. The Norwegian crown changed insignificantly on Wednesday, holding close to its lowest in almost a month against the greenback. The Canadian dollar, on the other hand, rose by 0.5% against the dollar today, after suffering severe losses yesterday.
According to Commerzbank’s Nguyen, the fact that the Canadian dollar’s losses are limited is unlikely to be seen as an entirely positive development domestically. She also stated that a weaker currency would be quite helpful to cushion the adverse economic effects of the collapsing oil price, at least partially.
Meanwhile, the Australian dollar edged up by 0.8% after a record surge in retail sales last month. While the recovery in U.S. crude CLc1 lifted it out of the negative territory, it’s still some 80% under January’s peak, trading at around $11 a barrel.