World's most-battered currencies see glimmer of hope in 2016

A Colombian Nukak Maku Indian woman counts money at a park in San Jose del Guaviare of Guaviare province on Sept 4, 2015.
A Colombian Nukak Maku Indian woman counts money at a park in San Jose del Guaviare of Guaviare province on Sept 4, 2015. PHOTO: REUTERS

MEXICO CITY (BLOOMBERG) - The outlook is improving for some of the world's most-battered currencies after a plunge in raw materials spurred routs from the Colombian peso to Russia's ruble in 2015.

Analysts are forecasting gains for the currencies most linked to oil even as they see more declines in store for those with stronger ties to industrial metals, such as Chile's peso and Peru's sol. After its worst year in more than a decade, Canada's dollar may bounce back with crude, while the Australian and New Zealand dollars are poised for tumbles as policy makers consider interest-rate cuts to spur growth, forecasts for next year show.

While a slowdown in China continues to hurt exporters, signs that the world's second-biggest economy is stabilizing and increased clarity on the timing for US rate increases are bolstering speculation that commodities will rebound from their worst year since 2008. Crude, grains and soy are all expected to rise next year, even as precious metals such as gold slip or stay little changed, according to analysts surveyed by Bloomberg.

"There'll need to be some differentiation" among so-called commodity currencies, said Charles St-Arnaud, a senior foreign- exchange strategist at Nomura Holdings in London. He predicts the Aussie may fall 10 per cent by the middle of next year while the Loonie holds steady.

Even a stabilization would be a drastic shift after 2015, when each of the commodity currencies fell at least 10 per cent against the US dollar. The Bloomberg Commodity Index, which tracks raw materials including gold, corn, natural gas and oil, has tumbled 25 per cent this year.

Nick Chamie, who oversees US$150 million of assets as chief investment officer at Bank of Nova Scotia's international wealth management unit, said the dramatic selloff opens the door for a rebound next year. He said oil may have more near-term upside than metals.

"The risk premium has been applied on a very generalized, across-the-board basis," Chamie said in an interview from Toronto. "There's scope for a tactical, short-term reversal of fortune at some point in 2016 for commodity currencies."

While investors remain concerned about a global economy that's projected to grow by 3 per cent this year, the slowest pace since 2009, there are signs of improvement in the US and China, the biggest commodity consumer. In the world's biggest economy, an increase in consumer purchases in November was accompanied by rising wages while in the East Asian nation, early indicators in December showed signs of stabilization as leaders say they'll do more to bolster expansion.

Even analysts who remain bearish on the currencies don't foresee a repeat of 2015's pain. Alan Ruskin, the global co-head of foreign-exchange research at Deutsche Bank in New York, projects declines in the Norwegian krone, the Australian dollar, the New Zealand dollar and the Canadian dollar. While its premature to say they've hit bottom, some of the least-loved currencies now may appear cheap, he said.

"We've hit such extremes," he said. "The speed and the extent of the decline in commodity prices and currencies should be much reduced from this past year"