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U.S. Dollar Spikes Lower on Another Surge in Commodity-linked Currencies

James Hyerczyk

The U.S. Dollar hit its lowest level against a basket of currencies on Thursday since December 1, driven there by primarily by another surge in commodity-linked currencies and a stronger Euro, which makes up the largest percent of the basket.

March U.S. Dollar Index futures settled at 92.300, down 0.312 or -0.34%. The index is close to posting a 0.50% loss for December. For the year, the Greenback is down more than 9 percent against the major currencies. This is its worst performance since 2003.

Daily March U.S. Dollar Index

Some analysts are saying that many institutional investors are closing their books at the year-end. Additionally, they have to deal with a deadline for taxation and reporting of performance, and such activity is seen leading to dollar selling pressure.

According to Shin Kadota, senior strategist at Barclays in Tokyo, “Seasonal trends in the currency market have shown that the dollar tends to weaken after Christmas through the first few days of the following year before eventually being bought back again.”



The Euro rallied to nearly a 1-month high on Thursday, settling at 1.1942, up 0.0054 or +0.45%. The rally was fueled by a bearish outlook for the U.S. Dollar. Traders showed a muted reaction to Italy’s announcement that it will hold an election on March 4. Traders said the news was likely already priced into the currency. Down the road, this poll is expected to produce a hung parliament and possibly market turbulence during the first quarter next year.



Firmer oil prices continued to support the Canadian Dollar. It closed at its highest level against the U.S. Dollar since October 20. The USD/CAD settled at 1.25681.

U.S. oil prices hit their highest levels since mid-2015 on the last trading day of the year as an unexpected fall in American production, as well as a fall in commercial crude inventories, stoked buying. This week, prices have been supported by ongoing supply cuts by top producers OPEC and Russia, an on-going pipeline outage in the North Sea and a pipeline explosion in Libya.



The Australian Dollar posted another strong gain against the U.S. Dollar on Thursday, reaching its highest level since October 24. The currency was driven higher by rising commodity prices especially iron ore and copper. Additionally, the widening of the interest rate differential between Australian Government Bonds and U.S. Government Bonds was supportive.

This article was originally posted on FX Empire