The weak oil market is poised for some recovery in 2016, offering potential upside to the currencies of oil-producing countries, an analyst said Monday.
"The oil market is over supplied, doesn't look great in the short run, but there is still a recovery story for the second half," said Dominic Schnider, UBS Wealth Management's head of commodity and Asia-Pacific forex. An uptick in oil prices will give some upside to oil currencies, particularly the Canadian dollar, which is also closely linked to a U.S. economy that is showing signs of a pickup.
The Canadian dollar, known as the loonie, is down 20 percent this year against the U.S. dollar amid a rout in energy prices that sent crude oil prices down about 40 percent so far this year.
In recent days oil showed some correction is immediately noticeable and quotations of oil currencies. Most settings are to use these corrections to occupy the new short positions in CAD, especially in a situation as in the pair USD / CAD, where elasticity is really strong.
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