US Dollar Climbs Against Commodity Currencies After OPEC Meeting

The US dollar rose against currencies that are closely tied to oil prices on Thursday, after the conclusion of a meeting between the Organization of the Petroleum Exporting Countries and other oil major producers. Today’s meeting discussed a possible extension for an agreement made last year that limits crude outputs to counter a global oversupply that forced oil prices lower.

During the meeting a deal was made to extend the agreement, which would have otherwise ended in June, until March 2018. However, investors felt disappointed as the new deal did not appear to increase the number of barrels that are removed from the market. The extension of the previous agreement for another 9 months failed to support oil prices today as it was widely expected.

The Organization of the Petroleum Exporting Countries has yet to release further details on the deal. Nonetheless, reports said that the organization, along with other major producers, will not reduce production more than 1.8 million barrels a day, which was agreed upon in December 2016.

The lack of a larger production cut raised concerns that OPEC members and other major producers are running out of options to support oil prices. Commodity currencies fell against the US dollar as traders worried that the production cut will prove ineffective in countering the negative pressure of rising US output on crude prices.

Nonetheless, the greenback weakened against a wider basket of other major currencies following today’s economic releases in the United States, which offered a mixed picture. The Census Bureau published a report on international trade at 12:30 GMT today, which revealed that goods trade deficit grew to $67.55 billion in April from $65.05 billion in March. Analysts had expected goods trade deficit to decline to $64.60 billion last month.

The disappointed data will likely reflect on the growth of gross domestic product in the second quarter of the year, which traders remain hopeful to show a rebound from the weak growth in the first quarter. Another report for overall trade balance that includes services will be released on June 2, but is unlikely to offer a different view since services remain little changed from one month to another.

Meanwhile, the Department of Labor updated its weekly number of initial jobless claims, showing an increase of 1,000 to 234,000 in the week ended May 20. The department also added that the moving average for four weeks, which displays less volatility, decreased 5,750 to 235,250.

USD/CAD rose to 1.3474 as of 17:45 GMT on Thursday from 1.3408 when trading started today. USD/CAD touched 1.3476 at 17:35, the pair’s highest level since yesterday. AUD/USD moved lower to 0.7452, the pair’s lowest level for the day, from 0.7494 at the beginning of the day.

The Dollar Index, which tracks the strength of the US currency against a basket of its major peers, was at 97.20 as of 17:45 GMT today from 97.23 yesterday.

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