Undoubtedly, the speed at which the oil market has reversed has shocked foreign exchange traders as much as it has those in the commodities space. Currencies from economies that depend on oil exports can only do so much amid what is now an energy market rout. With Tuesday bringing a twelfth consecutive day of losses for oil, the Canadian dollar, Norwegian krone, Malaysian ringgit and Mexican peso all fell to multi-month lows.
A $1.80 decline in US oil prices on Tuesday took the market’s total per-barrel loss since October 3rd to $20.90, or 27 percent. At just $56 per barrel, and now on course to post a sixth consecutive week of losses, oil is weighing heavily on the currencies of oil exporting nations—the so-called “petro-currencies.”
In Europe, the Norwegian krone slipped on Tuesday to a 16-month low of kr8.523 to the dollar.
The Russian ruble failed to weaken below Friday’s 7-week low but it remains under pressure, being down 3 percent on its value from this time last week. When last seen, the dollar bought 67.9 rubles.
In Asia, the currency of Malaysia, the ringgit, was quoted at a 1-year low of RM4.195 to the dollar.
Hopes heading into this week had been for higher oil prices following Sunday’s announcement by Saudi Arabia that it would cut oil exports by 500,000 barrels a day, beginning in December, in an attempt to avoid oversupply and support prices.
As is frequently the case, though, US President Donald Trump rattled markets with bearish remarks, again via twitter, as is his way.
“Hopefully, Saudi Arabia and OPEC will not be cutting oil production. Oil prices should be much lower based on supply,” Trump tweeted on Monday.
Per the Wall Street Journal, “[Trump’s] bearish comments surprised many analysts who said they had suspected Trump’s push for lower oil prices would end after the midterm elections were over.”
Holders of the aforementioned currencies can at least feel relieved by the forecasts of energy expert Jeff Brown of FGE Group—a multinational oil, gas and LNG consultancy.
“We need to get ready for [oil] prices bouncing right around the $70 range. That is where we will be over the next several months,” Brown told the Economic Times on Tuesday.