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Drop in Oil Prices Hit Commodity Currencies
Tuesday, 26 December 2006 19:36:34 GMT  |  Kathy Lien, Chief Strategist
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The drop in oil prices has pushed the commodity currencies lower today.  Not only have we seen a drop in crude prices but natural gas prices are also down a whopping 8 percent due to the warmer weather, which has sent USD/CAD to 8 month highs. 

The Australian dollar has also shrugged off reports of solid holiday sales and has instead fallen victim to overall U.S. dollar strength.  The New Zealand dollar is the only commodity currency that is able to remain steady thanks to strong carry trade demand.  In fact, the NZD/JPY is one the day’s, if not the month’s best performing currency pairs.  As long as Japanese data continues to give the Bank of Japan little reason to move interest rates, there could still be demand for carry trades.  Meanwhile there is nothing on the Canadian, Australian and New Zealand economic calendars until the New Year, which means that trading in those pairs will be completely dictated by the fluctuations in the US dollar. 

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