The dollar strengthened to a five- year high after OPEC kept oil output unchanged on speculation lower crude prices will support the U.S. economy while weighing on the currencies of commodity-producing nations.
The U.S. currency’s gains build on this month’s advance as a brightening economic outlook supports projections the Federal Reserve is moving closer to raising borrowing costs. The Australian dollar declined with Norway’s krone and Canada’s currency after the 12-nation Organization of Petroleum Exporting Countries kept its output target at 30 million barrels a day, even after the steepest slump in oil prices since the global recession. The yen fell with Russia’s ruble and Brazil’s real.
“Everything is favoring the dollar, be it the news from OPEC, energy prices or the fact that data in the U.S. continues to outperform,” said Sireen Harajli, a Mizuho Bank Ltd. strategist in New York. “That’s all pushing the dollar in one direction at this point.”
The Bloomberg Dollar Spot Index, which tracks the U.S. currency against 10 trading partners, rose 0.6 percent to 1,106.54 at 3:40 p.m. New York time, headed for its highest close since March 2009. The index is on track for a fifth monthly gain, the longest streak since March 2013.
The dollar climbed 0.9 percent to 118.71 yen after advancing to 118.98 on Nov. 20, the strongest level since August 2007. It added 0.2 percent to $1.2446 per euro. The yen depreciated 0.7 percent to 147.75 per euro.
The yen has fallen 5.4 percent against the greenback this month, poised for a fifth-consecutive month of declines, the longest run since the period ending December. The euro is also on track for a fifth month of losses versus the dollar, the longest streak since 2010.
The U.S. currency has strengthened against all of its 16 major peers this year, with the Norway’s krone losing 13.7 percent and Swedish krona dropping 13.6 percent.
Commodity currencies declined today after OPEC took no action yesterday to ease a global oil-supply glut amid crude’s tumble into a bear market this year. Crude-oil futures fell 10 percent to $66.15 a barrel in New York.
“It’s a painful impact to see oil below $70 a barrel,” Greg Anderson, global head of foreign-exchange strategy in New York at Bank of Montreal, said by phone. “When markets look at it, they say ’gosh, with the price of oil this low, this is going to bring turmoil to financial markets, this could bring geopolitical turmoil over the medium term, so what do I want to own?’ Dollars.”
The Russian ruble depreciated 3.6 percent to 50.4085, an all-time low. The currency is on track for its worst month in more than five years. Russia stands to lose as much as $140 billion a year as a result of lower oil prices and U.S. and European sanctions, Finance Minister Anton Siluanov said this week.
Brazil’s real slid 1.4 percent to 2.5654. Australia’s dollar slipped 0.5 percent to 85.06 U.S. cents while the Norwegian krone weakened 1.5 percent to 7.0289 per dollar and touched a five-year low.
Canada’s dollar fell 0.9 percent to C$1.1428 versus the U.S. currency, even as a report showed its economy grew at a 2.8 percent annualized pace in the third quarter, exceeding estimates.
“The oil producers are all going to suffer,” said Kit Juckes, global strategist at Societe Generale SA in London. In the U.S., “it will help the consumer and it will help the economy but, at the same time, the prospect of a further fall in inflation in the month ahead will definitely keep the debate about the timing of the first Fed rate hike alive and kicking.”
Japan’s currency depreciated for the first time in four days after a report showed consumer prices excluding fresh food slowed for a third month. A gauge of inflation rose 2.9 percent in October from a year earlier, equivalent to a 0.9 percent gain when the effects of April’s tax bump are excluded.
Japan’s two-year government rate dropped below zero for the first time and 10-year yields fell to 0.415 percent, the least since April 2013.
The yen may drop to as weak as 130 per dollar by the end of next year, driven by the monetary-policy divergence between Japan and the U.S., Daisuke Karakama, chief market economist at Mizuho Bank Ltd. in Tokyo, wrote today in a note to clients.
Europe’s 18-nation shared currency is poised to gain this week as European Central Bank Governing Council member Jens Weidmann said in Berlin that low energy prices are “like a mini stimulus package.” A report today showed inflation in the region slowed to 0.3 percent in November, matching a five-year low. The ECB meets to discuss monetary policy next week.
The Swiss franc traded as high as 1.20113 versus the euro before a vote Nov. 30 on requiring the central bank to hold at least 20 percent of its assets in gold.
Speculation the franc will strengthen through its 1.20 per euro ceiling is misplaced as the nation’s central bank has the tools to defend it, according to Raiffeisen Schweiz.
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