Oil prices briefly broke through the US$50 per barrel mark mid-last week, reaching US$52.51 on June 8, although prices have since declined, falling to their present US$48.88 per barrel.
Nevertheless, oil prices are well above their January lows of US$27.88.
According to Alfonso Esparza, Senior Currency Analyst at Oanda, the Canadian dollar has appreciated on oil’s rise. “It has been one of the biggest factors driving the loonie.” It is currently trading at 1.2913 to its US equivalent.
However he added that although the increase in oil prices has helped EM petrocurrencies, it has not been a game changer.
“The drop in the price of oil did more hurt to EM currencies than the current recovery has done to help them. Oil’s rise has not been able to offset the losses from 2 years ago.”
One senior EM economist noted that it is difficult to gauge whether the recent upturn in commodity prices has had a significant impact on EM petrocurrencies due to the pegging of these currencies to the dollar.
Petrocurrencies in the Gulf are pegged to the dollar, and in Nigeria there is a parallel rate for the naira.
By binding their currency to the dollar, many EM oil exporters have been able to add stability to their currency, but at the cost of reducing flexibility.
“Unpegged currencies, which have added flexibility, are performing better than their pegged counterparts. The Brazilian real is free floating and will enable the country to ‘bounce back’ in the future,” said Esparza.
The real has been slowly improving against the dollar, and is currently trading at 3.4668 to the greenback.
The economist noted that the Russian rouble appears to be one of the few petrocurrencies that is able to provide a good estimate for the performance of other currencies from oil-reliant nations.
The rouble (another unpegged currency), although strengthening against the dollar, has ultimately not done so significantly. Over the last month, it has fallen 0.7166 against the dollar, from 64.9309 to 65.6475.