NEW YORK: The dollar soared against oil-linked currencies on Tuesday, touching an 11-year high against the Canadian dollar and a 13-year high versus the Norwegian crown as concerns of excess supply and soft demand sent crude prices to near seven-year lows.
Falling oil and weak metal prices underpinned bets central banks of export-reliant economies would embark on more stimulus to weaken their currencies in a bid to help exporters.
"It's a perfect storm for commodity currencies," said Mazen Issa, senior currency strategist at TD Securities in New York.
The dollar touched C$1.3623, the strongest level against its Canadian counterpart since mid-2004. It rose 1.5 percent versus the Norwegian crown, touching 8.8194 crowns, its highest since April 2002.
U.S. crude prices fell to their lowest since early 2009, last down 0.4 percent at $37.51 a barrel. Brent futures in London fell as low as $39.81 to their lowest since February 2009. On Monday, they had tumbled 6 percent and touched their lowest since February 2009.
The Australian dollar also remained on the defensive after Chinese trade data for November did little to soothe concerns about China's economic slowdown.
The Aussie fell 0.85 percent to $0.7203 as this week's tumble in iron ore prices and the latest Chinese data weighed on the currency.
But overall, the dollar was mixed on the day, falling against safe haven currencies like the Japanese yen and Swiss franc. It fell 0.2 percent to 98.445 against a group of major currencies..
The dollar dropped 0.75 percent against the Swiss franc and 0.3 percent versus the yen. The euro moved briefly above $1.09 in afternoon trading, adding to a recovery from near 7-1/2-month lows sparked by the European Central Bank's less-than-expected deposit interest rate cut on Thursday.
The euro was last up 0.5 percent to $1.0887.
"The working assumption is that we are simply correcting the move that began in the middle of October," said Marc Chandler, chief global currency strategist at Brown Brothers Harriman & Co. "It was partly sparked by the ECB, but clearly colored by the extreme market positioning."
In the weeks leading up to the ECB's meeting, speculators had increased bullish bets on the U.S. dollar to their highest in eight months, according to Reuters calculations and data from the Commodity Futures Trading Commission.
Some market analysts had expected the ECB to cut its already-negative deposit rate as low as -0.5 percent and add to its quantitative easing program, which it did not.
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