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  • Although commodity prices have soared so far in 2022, with Brent crude on Wednesday notching its highest price since October 2014, commodity-based currencies have been relatively subdued.
  • BMO Capital Markets European Head of FX Strategy Stephen Gallo suggested that ripple effects from China could be feeding into the performance of developed market commodity-based currencies.
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China’s zero-Covid policy and broader economic circumstances could be weighing on currencies that should be reaping the benefits of higher commodity prices, strategists at BMO Capital Markets have suggested.

Although commodity prices have soared so far in 2022, with Brent crude on Wednesday notching its highest price since October 2014, commodity-based currencies such as the Norwegian krone and Australian, New Zealand and Canadian dollars have been relatively subdued.

As of Friday morning in Europe, the Aussie dollar was down 0.9% and the kiwi by 1.45% against the greenback year-to-date. The Canadian dollar was also down 0.9% year-to-date, while the U.S. dollar had gained 0.55% against the Norwegian krone.

“What we would typically expect to see is the New Zealand dollar rallying alongside agricultural commodity prices and Aussie rallying alongside base metals, but thus far this year, Aussie and Kiwi are both down — get this — against the euro and the yen,” Greg Anderson, BMO’s global head of FX strategy, said in a podcast last week.

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