The forex market had bad news for traders holding some of the world’s major commodity currencies on Tuesday – Tuesday in the US, anyway. Wednesday, in Australian time.

Across the board, expectations of low global growth rates pushed down the demand for the world’s major commodities, with oil most prominent among them. While the Aussie came off of lows yesterday against the dollar, it slid today against that currency and continued what is now a five day downhill streak against the Yen.

This last trend was compounded on Tuesday by boasting coming from Japanese ministers that Japan will be the first G7 nation out of recession.

Across the globe, crude’s drop below the forty dollar mark was bad news a number of currencies. The Russian government was forced to inject some steroids into the rescue efforts of their currency. That, however, couldn’t slow the slide of one of the world’s most endangered currencies as traders continued to bet on further devaluations by the Russian government.

That being said, the apparent resolution to the Ukrainian gas line crisis will surely allay fears of over the ruble for at least the immediate short term.

Just as the two countries’ climates resemble one another, Canada’s currency has been feeling the same pinch as Russia’s. Most strikingly, the vaunted Canadian trade surplus has almost vanished, falling to a mere $1 billion. The psychological impact of this fact combined with crude’s flirtation with the $40 mark to put considerable pressure on the loonie. It’s currently trading at roughly 1.22 USD.

Bloomberg’s survey of economists predicts a fall to $1.25, though economists at the RBC predict a more dramatic drop off to the $1.31 range.

Speaking of striking predictions, UBS is advising investors to sell euros and buy dollars to get in front of the ECB’s January 15 meeting – one day after my birthday: give me a .5% cut, boys… seriously, you’re economy is in horrid shape, give yourselves an early birthday gift in the form of a .5% cut, for the love of God, you inflation-paranoiac freaks.

UBS’ predictions, though, didn’t stop the dollar from falling against the euro to roughly $1.32 in the face of an expected weak retail sales report.

What’s a bit surprising right now is UBS’ prediction of the euro a decent amount against the currently-battered sterling.

Risk aversion is baaAaack, and has been pushing the dollar back up from its Gaza-inspired lows, with the same UBS fellows – an overconfident bunch, methinks – also lowering their call on the dollar/yen to 90 from the initial 95.

The topic of risk aversion – it’s almost like we didn’t have a New Year – brings us back to the commodity currencies. A Seattle bank’s suspension of dividends reaches across the Pacific, apparently, because investors that the previous day had been feeling comfortable with risk enough to put money into the Aussie quickly retraced their steps, bringing money home to the dollar.

Similarly, New Zealand’s kiwi fell to just 48.62 yen, a four-week low.

The cause of that Seattle bank’s woes? You guessed it: residential mortgage bonds. Shouts of “happy New Year, everyone” should be delayed until August, or until the new treasury secretary decides to get a clue a require banks to be lending all of the capital injections they receive.

This entry was posted on Tuesday, January 13th, 2009 at 11:02 pm and is filed under Australian Dollar, British Pound, Canadian Dollar, Euro, US Dollar. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.