Dollar widens gains against oil producers as crude sinks
New York (Dec 12) The dollar moved higher against the Norwegian krone, Russian ruble, Canadian dollar and Brazilian real Friday as West Texas Intermediate crude extended its decline — dropping as low as $57.95 a barrel, at one point.
“Lower crude prices are largely dictating direction in FX markets today,” said Adam Cole, head of G10 FX strategy at RBC Capital Markets.
Crude moved lower Friday after the U.S. Energy Information Administration said that it expects production to increase in 2015.
The dollar rose to 57.8970 against the ruble, bringing the ruble’s total losses against the dollar to around 44% in 2014. Earlier, the Russian Central Bank intervened in the foreign exchange market, briefly pushing the ruble back to 55 against the dollar. But speculators quickly pushed it back to a new record high.
Earlier Friday, the Central Bank of Russia intervened on the foreign exchange market in an effort to slow the ruble’s slide. The ruble briefly recovered the 55 level, only to lose ground again. The dollar USDRUB, +3.31% was recently buying 57.53 rubles versus 56.39 rubles late Thursday.
An interest-rate hike on Thursday by the central bank to 10.5% from 9.5% didn’t halt the ruble’s decline, either.
In other emerging-markets currency trading, the dollar rose to 2.66 Brazilian real USDBRL, +0.43% , its highest level since April 2005. It traded at 2.65 Thursday.
Win Thin, global head of emerging markets strategy at Brown Brothers Harriman, said that the expectation that the Fed will signal an impending rate hike at its meeting next week has also weighed on the real and ruble.
“Fed tightening can be very disruptive for [emerging-markets],” Thin said. Rate hikes can translate into less liquidity in the dollar, which helps bolster the buck against other currencies.
The dollar traded at 7.35 krone USDNOK, +0.88% , its highest level since 2003. It traded at 7.33 Thursday.
The greenback traded at 1.155 Canadian dollars USDCAD, +0.32% , compared to 1.150 Thursday. Camilla Sutton, chief FX strategist at Scotiabank, said in a Friday research note that the Canadian dollar isn’t as closely tied to the price of oil as some other major oil producers. But added that “the lower oil prices fall, the more vulnerable [the Canadian dollar] becomes.”