Daily Currency Update

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A crash in financial markets and crude oil sends the Greenback to a 1-year and 2-month low versus the Euro.

USD - United States Dollar

Crude oil crashed more than 30 percent after Russia ignored pressure from OPEC allies to cut crude oil production. Saudi Arabia, the other major player in the OPEC, asked for a cut of 1.5 million barrels a day, but Russia did not agree. Russia is inflexible, probably because it is able to afford a lower crude oil price based on the economic austerity it has applied over the last few months. The breakup of the OPEC and alliance triggered an all-out price war, with both Russia and Saudi Arabia poised to flood the market with cheap oil. As a consequence the Greenback fell to a 3-year and 4-month low versus the Yen, a fall of almost 4 percent at one point during the overnight trading session (the worst decline since 2016).

The U.S. dollar is falling 1.6, 3.3, 0.51, and 1.6 percent versus the Euro, Yen, Pound, and Swiss Franc, respectively, this morning. However, the rally in U.S. treasuries is unlike anything observed in the last 40-plus years, and FX market pricing suggests tough times in the financial industry.

The IMF’s chief economist urged policy makers around the world to implement targeted fiscal, monetary and financial market measures to help households and businesses impacted by the Coronavirus outbreak. Last week, Managing Director Kristalina Georgieva said that the global economic outlook has shifted to, “...more dire scenarios,” as the virus has spread undetected and that it’s still difficult to predict the impact.

Key Movers

The Japanese Yen jumped to its highest level in more than three years, while U.S. Treasuries surged on demand for haven assets as the plunge in oil prices sent another shock wave through the world economy. Market participants also piled into the Swiss Franc, which touched a four-year high against the greenback, while the currencies of oil exporting countries, such as Norway, Mexico and Canada, were hammered. At the same time, the Australian dollar saw its biggest intraday loss since 2008. The Norwegian Krone hit the lowest level against the Greenback since 1985 after Saudi Arabia decided to slash official crude selling prices and increase output, which sparked the worst sell-off in oil since the U.S. war in Iraq in 1991.

The collapse in the price of crude oil will likely create another disinflationary force for the global economy, which will bring even more room for central banks to continue easing and pumping money into their economies and support an already sluggish growth.

Expected Ranges

USD/CAD: 1.3458 - 1.3648 ▲

EUR/USD: 1.1350 - 1.1450 ▲

GBP/USD: 1.3051 - 1.3133 ▲

AUD/USD: 0.6576 - 0.6658 ▼

NZD/USD: 0.6307 - 0.6410 ▲