aud fundamentals

Commodity Dollars Lose Luster Despite Jump in Commodities - Why?

Tuesday, 11 November 2008 02:31:26 GMT  |  Terri Belkas, Currency Strategist

Commodities like oil and gold started the week off on a strong note following the announcement of China’s $586 billion stimulus plan, as the nation accounted for 27 percent of global growth last year, according to the International Monetary Fund (IMF), and is the second-largest consumer of oil.

Typically, this would provide a boost to commodity currencies like the Australian dollar, since Australia sends 15 percent of its exports to China. Likewise, the Canadian dollar tends to rise on such news due to its status as the top oil provider for the US, according to the Energy Information Administration. However, with demand for risk still fairly low, the commodity dollars have taken a hit. Focusing on Canada, data from the region has proven to be rather resilient lately, as last Friday's net employment change surprisingly rose by 9.5K in October versus expectations of -10.0K, while this morning's housing data showed that Canadian housing starts fell less than expected to 211.8K from an upwardly revised 218.6K. While both of these indicators suggest that domestic demand may be holding up rather well, the export-dependent economy is bound to feel the impact of a sharp slowdown in the US, which is Canada's biggest trade partner. That isn’t to say the commodities dollars won’t bounce anytime soon, but the long-term trend remains in favor of Australian, New Zealand, and Canadian dollar weakness.

Related Articles: Canadian Dollar May Benefit From Improving Global Outlook, Australian Dollar to Rise As Capital Flows Back to Risky Assets


Check out Daily Fundamentals in its entirety for analysis and outlooks on the US dollar, euro, British pound, Japanese yen, and the commodity dollars.

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