Commodity rout hits currencies of resource exporters

TOKYO • A commodity rout that has seen prices tumble to a 13-year low, sent the currencies of countries that rely on exporting resources towards their worst year since the financial crisis.

The Australian and New Zealand dollars were within one cent of six-year lows yesterday amid signs of a slowdown in China, the world's biggest consumer of raw materials. The Canadian dollar sank to its weakest since 2004 as plunging oil prices shrank the economy.

All three currencies have fallen more than 10 per cent this year against the American greenback, the first time that has happened since 2008, spurring hedge funds to turn the most bearish on them since the start of 2014.

"Commodity prices have shown a clear and broad-based falling trend in recent months, and that's being reflected clearly in the currencies of commodity-exporting nations," said Mr Greg Gibbs, a strategist at the Royal Bank of Scotland Group in Singapore.

Canada's currency slid 0.3 per cent to C$1.3130 against the US dollar as of 8.25am in London (3.25pm Singapore time). The Aussie currency was at 72.92 US cents from 73.08, and the NZ dollar was little changed at 65.95 US cents.

The ringgit fell 0.6 per cent to 3.8485 per dollar at 1.56pm in Kuala Lumpur, over weak China manufacturing data as well as contraction in Malaysia's factory output.

"The weak China PMI numbers and lower oil prices are weighing on the ringgit," said Mr Nizam Idris, the Singapore-based head of foreign-exchange and fixed-income strategy at Macquarie Bank. "It also feels like the central bank is stepping aside and letting the ringgit fall further."

Combined net short positions for the Canadian, Australian and NZ dollars against the greenback rose to 119,491 contracts last week, the most since January last year, according to the latest data from the Washington-based Commodity Futures Trading Commission.

A private manufacturing gauge for China released yesterday slipped to a two-year low.

The data adds to threats that include a near US$4 trillion (S$5.5 trillion) rout in Chinese stocks and a fall in car sales that endanger the government's goal of about 7 per cent economic growth this year.

BLOOMBERG

A version of this article appeared in the print edition of The Straits Times on August 04, 2015, with the headline 'Commodity rout hits currencies of resource exporters'. Print Edition | Subscribe