Dollar gains against commodity currencies on oil weakness

John Phillips | Digital Editor | CNBC

The U.S. dollar rallied against commodity currencies such as the Norwegian crown and Russian ruble on Wednesday after declining oil prices weighed on the currencies of oil-dependent economies, while short-covering kept the euro afloat.

Brent crude oil retreated toward 11-year lows as Saudi Arabia's oil minister made it clear the kingdom had no plans to scale back its output.

"The weakness in Russia, Mexico, and Norway as a derivative of lower commodity prices doesn't look likely to change anytime soon," said Richard Scalone, co-head of foreign exchange at TJM Brokerage in Chicago.

He also said the dollar's strength against the Brazilian real was a result of weak oil prices, given the South American nation's ethanol exports.

The dollar hit a more than one-year high against the Russian currency of 73.45 rubles, and a more than one-week high of 8.798 crowns against the Norwegian unit. The greenback hit a one-week high against the real of 3.9849 reais and a more than two-week high against the Mexican peso of 17.369 pesos.

The U.S. dollar index, which measures the greenback against a basket of six major rivals, was last up 0.2 percent at 98.30. The dollar also gained against the Swedish crown, sterling and the Canadian dollar, three currencies in the index.

Sweden's crown fell against the dollar after the central bank warned it was "highly prepared" to intervene and weaken the currency to bolster very low inflation.

Traders who had bet against the euro for much of this year on the view that lower interest rates in the euro zone compared with the United States would weigh on the currency reversed those bets, which buoyed the euro and kept it mostly flat against the dollar.

"Some short euro positions are still being squared in the marketplace," said Thierry Albert Wizman, global interest rates and currencies strategist at Macquarie in New York. "People want to begin the year with flat positions," he said.

The euro was last 0.1 percent lower against the greenback at $1.092. The dollar was last up 0.1 percent against the yen at 120.55 yen. The dollar was last down 0.5 percent against the Swiss franc at 0.987 franc.