CAD, AUD, ZAR Slide as Commodity Currencies Feel the Heat ? Oil, Iron Drop

On Wednesday the recent sell-off in commodity-driven currencies continued and the Canadian Dollar (CAD), Australian Dollar (AUD) and South African Rand (ZAR) all suffered.

Canadian Dollar (CAD)
The latest slump in the price of crude oil, Canada’s most important commodity, dragged the Canadian Dollar to a five-year low against the US Dollar. The price of Brent futures fell by an additional 0.7% on Wednesday. Recently the Bank of Canada asserted that the softness in oil prices could seriously undermine Canadian growth. Additional dovish comments from the BOC also contributed to the Canadian Dollar’s broad-based declines. In the view of currency strategist Camilla Sutton; ‘I think what we have is really everything working against the Canadian Dollar here. These developments include a disappointing GDP release last Friday, coupled with the collapse in oil prices and a dovish Governor [Stephen] Poloz, all of which have taken place in an environment of broad [US Dollar] strength.’ Positive jobs data from the US compounded the CAD/USD exchange rate’s downward trend.

Australian Dollar (AUD)
The Australian Dollar fell by over 1.0% against the Pound and recorded heavy losses against the US Dollar on Wednesday as falling oil prices saw investors ditch commodity currencies and buy into the safe-haven ‘Greenback’. The US Dollar was already riding high off the back of the Republican victory in the midterm elections. As one industry expert highlights; ‘The Dollar looks fantastic. There could definitely have been a bounce on the back of the elections. Republicans are considered to have a better grip on the economy, but we are limited on how much that can impact the Dollar’. Meanwhile demand for the Australian Dollar was seriously undermined by a soft AiG Performance of Services Index. The gauge fell further into contraction territory in October. Even if the upcoming Australian employment figures impress, the Australian Dollar could continue to trend lower in response to sliding commodity prices.

South African Rand (ZAR)
Over the course of local trading the Rand lost ground against the US Dollar as disappointing data from both China and the Eurozone (South Africa’s main trading partners) pushed the currency lower. Overnight China’s Services PMI registered a decline from 53.5 to 52.9, with the fall taking the nation’s Composite PMI to 51.7 from 52.3. Meanwhile, composite and services PMI’s for the Eurozone and Germany (the currency bloc’s largest economy) were negatively revised. The Eurozone also published concerning retail sales figures, with sales plummeting by -1.3% on the month in September. The Rand was also struggling as the threat of power outages hangs over South Africa. According to analyst Anisha Arora; ‘Dollar/Rand left 11.0 resistance intact on Tuesday. However, locally, the power grid remains constrained, leaving the scope for Dollar/Rand pull-backs limited.’ The declines in the price of oil and iron ore saw the US Dollar to South African Rand exchange rate strengthen to 11.1700.