Oil Prices Rally on Global Supplies

The Australian and Canadian dollars increased helped by a surge in oil prices to five-month highs.

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The Australian and Canadian dollars increased on Tuesday, helped by a surge in oil prices to five-month highs that boosted most commodity-linked currencies.

Oil prices have rallied on anticipations that worldwide supplies would tighten up because of fighting in Libya, OPEC-led cuts and U.S. sanctions versus Iran and Venezuela, while energy prices slid marginally on Tuesday.

The Australian dollar increased 0.3 percent to $0.7151 after previous moving a three-week high.

Canada's currency firmed to C$1.3293, its strongest since March 21.

Societe Generale, analyst noted that although oil exporter currencies including the Russian rouble, Mexican peso, Canadian dollar and Norwegian crown were all doing well, important importer country currencies like the Turkish lira, Korean won and Indian rupee had suffered.

"I wouldn't want to push this theme too far but we'll stay long NOK against EUR and USD," he wrote in a daily note.

Foreign exchange moves elsewhere were limited on Wednesday. The U.S. dollar tumbled for a second next day however Washington's proposed list of tariffs on European goods had no instant effect on the euro.

Analysts, though, said they did not anticipate that to last.

"Even if these tariffs are going to have limited overall real economic impact they would nonetheless come at a bad moment, as the euro zone economy is already weakening," Commerzbank analyst Thu Lan Nguyen said.

"Any additional headwinds would further dampen the prospect of a rapid recovery and fuel speculation about further ECB measures. The euro is likely to continue struggling in this environment."

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The euro jumped 0.1 percent to $1.1275 with traders also preparing for Wednesday's European Central Bank meeting.

The dollar slid 0.1 percent to 96.915, its second day of losses.

Sterling soared beyond $1.31 on a media report that German Chancellor Angela Merkel was ready to put a five-year limit on the Northern Ireland backstop offer, in a move that could help convince euroskeptics to back British Prime Minister Theresa May's deal and help end a deadlock over Brexit.

The Norwegian crown reinforced 0.1 percent to 8.5335 for each dollar after rallying 0.7 percent on Monday due to the higher oil price. It was also slightly up against the euro.

The crown was also lifted after Norges Bank Governor Oeystein Olsen said on Monday that legislators would resume hiking interest rates over the upcoming months, putting the bank in contrast to most that have promised to keep rates low for extended in the face of waning financial momentum.

The Japanese yen increased 0.2 percent to 111.325 yen per dollar.

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