Commodity pairs - The divergence between Canadian dollar, Norwegian krone and Oil

*Above WTI crude and USDCAD daily price show divergence trend.


Oil price has been known as the indicator for commodity pairs, and a stong oil price will lead to strong Canadian dollar and Norwegian krone. In the past three months, Brent crude oil prices rose 16%, WTI crude oil rose 10%. However, during this period the Canadian dollar dropped, and the Norwegian krone seems not being affected, which means, the correlation between oil prices and commodity currencies have weakened.

But why did Canadian dollar and the Norwegian krone in recent weeks has been significantly different from the oil price performance? Special factors and domestic factors may explain the poor performance of the Canadian dollar and the Norwegian krone, but the low volatility of oil prices and the rise in US debt yields also play a role in reducing the sensitivity to oil prices.

As many negative factors have been priced by the Canadian dollar and the Norwegian krone, coupled with the US bond yields are also stabilized, this background development may be more conducive to foreign exchange and oil price adjustment, which may continue in the next few weeks on the two currencies Constitute support.

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