NEW YORK (Reuters) - The U.S. dollar rallied against commodity currencies such as the Norwegian crown and Russian rouble on Wednesday after declining oil prices weighed on the currencies of oil-dependent economies, while short-covering kept the euro afloat.
Brent crude oil retreated toward 11-year lows as investors worried about slowing demand and high supplies. The decline hit currencies of commodity-dependent countries including the Russian rouble, Canadian dollar, Norwegian crown, Brazilian real and Mexican peso.
“It looks like you’re not going to get any return to higher levels in energy prices in general in 2016, and that bodes poorly for all the commodity currencies,” said Joseph Trevisani, chief market strategist at WorldWideMarkets in Woodcliff Lake, New Jersey.
The dollar hit a more than one-year high against the Russian currency of 73.62 roubles, and its highest level in at least 13 years of 8.834 crowns against the Norwegian unit. The greenback hit a one-week high against the real of 4.0185 reais and a more than two-week high against the Mexican peso of 17.3993 pesos.
The U.S. dollar index, which measures the greenback against a basket of six major rivals, was last up 0.15 percent at 98.255. The dollar also gained against the Swedish crown and Canadian dollar, two currencies in the index.
Sweden’s crown fell against the dollar after the central bank warned it was “highly prepared” to intervene and weaken the currency to bolster very low inflation.
Traders who had bet against the euro for much of this year on the view that lower interest rates in the euro zone compared with the United States would weigh on the currency reversed those bets, which buoyed the euro.
“Some short euro positions are still being squared in the marketplace,” said Thierry Albert Wizman, global interest rates and currencies strategist at Macquarie Ltd in New York. “People want to begin the year with flat positions,” he said.
Analysts said trading was thin, with many traders reluctant to take new positions heading into the new year.
The euro was last up 0.11 percent against the greenback at $1.09305. The dollar was last up 0.05 percent against the yen at 120.530 yen. The dollar was last down 0.7 percent against the Swiss franc at 0.98620 franc.
Reporting by Sam Forgione; Editing by Dan Grebler and Chizu Nomiyama