Commodity rout spurs worst resource currency meltdown in 7 years

TOKYO (BLOOMBERG) - There's been no respite in the commodity rout that's seen prices tumble to a thirteen-year low - and that's sending the currencies of nations that rely on exporting resources toward their worst year since the financial crisis.

Canada's dollar sank to its weakest since 2004 as plunging oil prices shrank the economy and prompted Prime Minister Stephen Harper to call an early election. The Australian and New Zealand dollars were within one cent of six-year lows on Monday amid signs of a slowdown in China, the world's biggest consumer of raw materials. All three currencies have fallen more than 10 per cent this year, 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 Greg Gibbs, a strategist at Royal Bank of Scotland Group in Singapore. "The Canadian dollar looks particularly vulnerable with five months of consecutive declines in GDP and an uncertain election called over the weekend."

Canada's currency slid 0.2 per cent to C$1.3113 against the US dollar as of 12:38 p.m. in Tokyo, and earlier touched C$1.3133, the weakest since September 2004. The Aussie was at 73.04 U.S. cents from 73.08, less than one cent from a six-year low of 72.35 set Friday. The kiwi fell 0.1 per cent to 65.88 U.S. cents. It hit a six-year low of 64.99 in July.

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

A private manufacturing gauge for China released Monday slipped to a two-year low, after an official factory index Saturday was weaker than economists forecast amid a drop in new orders and jobs. The data add to threats that include a near-US$4 trillion rout in Chinese stocks and a fall in car sales that endanger the government's goal of about 7 per cent growth this year.

The Bloomberg Commodity Index has plunged 11 per cent since the end of June. West Texas Intermediate crude declined 0.8 per cent to US$46.74 a barrel Monday after capping its worst month since 2008 in July amid concern over a global supply glut.

Mr Harper on Sunday called for an election in October as the oil shock ransacks growth and voters become weary of his nine- year-old government. Canada's economy sank further into contraction in May, with a fifth monthly decline in gross domestic product marking the longest slump since a 2008-2009 recession.