LONDON — The U.S. dollar rose on Tuesday against most major currencies as investors sought a safe haven after a plunge in oil prices a day earlier.
U.S. crude oil futures moved into negative territory for the first time on Monday, as a sharp fall in global fuel use due to the coronavirus pandemic creates a supply glut and a shortage of storage capacity.
Oil-linked currencies like the Norwegian crown and the Canadian dollar were Tuesday’s worst-performing currencies, along with the Swedish crown, which is very sensitive to global economic stability.
“Today’s price falls, and the associated sell-off in oil-linked currencies such as CAD and NOK, suggests market participants are bracing for a deeper and longer (oil) supply glut,” said Ranko Berich, head of market analysis at Monex Europe.
The Norwegian crown fell to a near one-month low of 10.6620 against the U.S. dollar and was last down 2.2% on the day . The Canadian dollar fell to a three-week low of $1.4265 and was trading last down 0.5%.
But with Norway’s central bank buying NOK2 billion per day in April to prevent the crown weakening further, the currency remains somewhat supported on the demand side, analysts said.
The Swedish crown was down 0.5% at 10.08.
A considerable decline was seen in the pound, too, as investors offloaded British assets to raise cash to cover losses resulting from the oil price collapse, according to Kenneth Broux, head of corporate research at Societe Generale.
“Potentially investors have to liquidate some of the positions they have just to cover the losses,” he said, adding that because of Britain’s current account deficit, sterling seemed an obvious choice.
Sterling was last down 0.7% at $1.2344, having fallen earlier to a two-week low of $1.2315.
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The mood among German investors improved in April as concerns about the impact of the coronavirus pandemic on Europe’s largest economy seemed to have eased, a survey showed on Tuesday.
That left no trace on the euro, however, which was last down 0.4% at $1.0827.
“The euro is suffering as markets contemplate the increased borrowing that will be necessary to fund the recovery” from COVID-19, said Marshall Gittler, analyst at broker BDSwiss. European countries have been issuing debt to support their locked-down economies.
Against the safe-haven the Japanese yen, the dollar was last trading down 0.2% at 107.39.
U.S. West Texas Intermediate crude for May delivery was trading last at minus $6.3 per barrel, off a low of -$40 hit in New York trading.
The May contract expires on Tuesday. The more actively traded June contract was down at $16.58 a barrel.
Factory closures and travel curbs enforced to slow the pace of new coronavirus infections have triggered a collapse in oil prices. This is drawing money from commodity currencies and other risk assets to the safety of dollar-denominated assets.
(Reporting by Olga Cotaga; Editing by Catherine Evans)
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