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Renewed US dollar weakness has been mainly evident against the commodity-related G10 currencies of the New Zealand dollar (+3.0%) and Australian dollar (+2.6%). The oil-related currencies of the Canadian dollar (+1.4%) and Norwegian krone (+1.1%) have also outperformed. Commodity currencies are set to continue strengthening in the opinion of economists at MUFG Bank.

Key quotes

“The commodity-related currencies continue to benefit from building confidence in the outlook for the economic recovery. It has been notable that global activity data has continued to surprise to the upside at the start of this year in spite of the COVID-related restrictions that have been in place over the winter. It suggests that global economies have been adapting better than expected which is helping to dampen downside risks to growth.” 

“The outlook for a stronger global recovery has been supported by further positive vaccine news. The US FDA reported yesterday that Jonson & Johnson’s vaccine was effective at preventing severe COVID-19 symptoms in the US, Brazil and South Africa. It provides reassurance that current vaccines will continue to help reduce the risk of severe disease even from COVID-19 mutations which will help to ease pressure on health systems and ultimately encourage the re-opening of the global economy.” 

“The improving global growth outlook continues to be supported by loose monetary and fiscal policies. The main message from major central bank officials this week is that loose monetary policy is set to remain accommodative for the foreseeable future even as growth is expected to strengthen. Support from fiscal policy particularly in the US which will have positive spill-overs for the rest of the world is also set to receive a significant boost in the month ahead when the Biden administration is expected to pass through another sizeable stimulus package of around $1.5-1.9 trillion.” 

“For now, we continue to see the current trading environment as remaining supportive for commodity-related currency strength.”


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