The price of WTI crude oil rose by almost a dollar yesterday to $48.79 – it’s sixth daily gain in the past seven – and prices in the futures market for 62% iron ore held above $60 per metric ton, both of which gave a boost to commodities currencies.
Oil rallied after energy ministers from Russia and Saudi Arabia – the world’s top two oil producing nations – said yesterday that plans to limit oil output would be extended by nine-months to the end of Q1 2018.
The two energy giants will now attempt to persuade OPEC members, who meet in Vienna on May 25th, as well as decision makers from eleven other non-OPEC nations, all of whom backed output cuts in December 2016, to back the extension. Output cuts are considered crucial to reining in oversupply and subsequently raising the price of ‘black gold’.
On the news, the exchange rates for CAD/USD, AUD/USD and NZD/USD rose by 0.5% to 0.7333, by 0.4% to 0.7412, and by 0.4% to 0.6880 respectively.
Another currency affected by commodities markets and which also made strides yesterday is the Indian rupee. The rupee rose for the fourth consecutive day, with USD/INR falling to 64.04.
Below 64.0 in USD/INR there appears little in the way of technical support, and with the Reserve Bank of India seemingly comfortable with a rapidly appreciating currency – the rupee has been one of 2017’s best performing currencies and has rallied 7% against the dollar since highs posted on January 11th – as well as the rupee remaining an attractive carry trade vehicle, there appears little reason to believe that sub-64 prices (and perhaps much lower) aren’t in the making.
Thailand Growth Better Than Expected
The Thai baht received a boost yesterday and USD/THB fell to 34.54 as first-quarter GDP beat market expectations and climbed at its fastest quarterly growth rate since December 2012.
The National Statistical Office of Thailand said yesterday that the Thai economy grew by 1.3 percent in Q1 – much stronger than an upwardly revised 0.5% expansion in Q4 of 2016 (originally recorded as 0.4%) and above the market consensus for growth of 1.2%.
Like the Indian rupee, the baht has appreciated steadily against the US dollar throughout 2017. The baht is now worth 4.2% more than it was on the first trading day of the year, January 3rd, when the USD/THB exchange rate reached highs of 36.0.
However, despite the Thai currency having been in an overall trend of appreciation against the US dollar from as far back as the third-quarter of 2015, Thailand qualifies under criteria for being a potential currency manipulator laid out by the Trump administration in March, and as such is under investigation by the US Commerce Department for abusive trade practices. If found “guilty”, duties may be imposed on Thai imports, which would reduce demand for goods from the Southeast Asian nation.
In April, the Governor of Thailand’s central bank, Veerathai Santiprabhob, denied the country had managed the baht’s valuation in a manipulative way. “Thailand has not adopted any exchange rate policies to gain an unfair competitive advantage in trade,” said Santiprabhob.
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