Dollar Slides Versus Commodity-Linked Currencies

The U.S. dollar failed to pare yesterday’s losses as risk appetite continued to favor higher-yielding and commodity related currencies, erasing partially last week’s advance for the greenback as factors supporting the dollar’s strength continued to fade this Tuesday.

The greenback had its second day of losses this week even if pending home sales in the U.S. increased, as demand for riskier assets rose globally allowing specially commodity linked currencies like the Canadian dollar and the Norwegian krone to outperform the U.S. dollar in foreign-exchange markets. Metallic commodities also fueled demand for the Brazilian real, which had a big slump versus the greenback in January, as risk aversion impacted severely the best performing currency in foreign-exchange markets last year.

Divergent events are causing the dollar to have high volatility in the past few months, as weeks of risk aversion followed by periods of risk appetite confused investors and provided good opportunities for day-trading in currency markets. It’s hard to predict to what direction charts will move as multiple events push market sentiment to opposite directions, and their strength is yet to be determined.

EUR/USD continued to gain and reached 1.3967 as of 18:41 GMT from a previous rate of 1.3917 yesterday. USD/CAD fell to 1.0580 from 1.0633.

If you have any questions, comments or opinions regarding the US Dollar,
feel free to post them using the commentary form below.