Currencies: Oil slide fuels dollar’s retreat against yen

NEW YORK (MarketWatch) — The U.S. dollar extended its gains against the euro, but surrendered earlier gains against the yen and the pound as Nymex-traded crude oil futures clung to the $ 45-a-barrel level and the U.S. Energy Information Administration said oil supplies will outpace demand through 2016.

The pound GBPUSD, +0.02%  hit a low of $ 1.5076 after price-inflation data for the U.K. registered the weakest reading in 14 years. It recovered to $ 1.5152, flat compared to its level of $ 1.5172 Monday afternoon, after the U.S. Energy Information Agency said oil prices will likely remain subdued through 2016, which weighed on the dollar.

Falling oil prices and a dour supply outlook also dragged the dollar USDJPY, -0.03% lower against the yen. The dollar traded at ¥117.7400, compared with ¥118.35 late Monday in New York.

Japan relies on oil imports, and its economy has benefitted from more affordable energy costs and consumer prices due to the lower oil price.

The euro continued to weakened after Bank of England Gov. Mark Carney joined the Federal Reserve in calling on the European Central Bank to adopt new stimulus measures.

The ECB and President Mario Draghi have made it “very clear” that investors can expect “considerable asset purchases” in the months to come, Carney said in an interview with the BBC Tuesday.

The euro slipped to $ 1.1773, from around $ 1.1800 late Monday, recovering from the nine-year low of $ 1.1750 hit earlier in the global day. Pressure has mounted on the shared currency as the ECB’s Jan. 22 meeting approaches. Many analysts expect the central bank to announce new easing measures then, which would further weaken the euro.

The ICE Dollar index DXY, +0.19% which measures the greenback’s strength against a trade-weighted basket of six rival currencies, rose 0.35% to 92.2980.

In other currency trading, the dollar rose USDNOK, -0.17% to 7.76 Norwegian krone, compared to 7.75 Monday afternoon. Norway is Europe’s largest oil producer, and its currency is especially sensitive to movements in the price of oil.

Elsewhere, the ruble fell to its lowest level against the dollar since its December collapse, and held to those levels.

The Canadian dollar continued to USDCAD, -0.04%   trade flat against the dollar despite the falling oil price.

Dollar Index

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