Commodity Currencies Extends Gain Amid Rising Risk Appetite

Commodity currencies such as the Australian, the New Zealand and the Canadian dollars continued to be strong against their major counterparts in the Asian session on Friday amid rising risk appetite, as the rebound in crude oil prices and expectations of more stimulus from the European Central Bank boosted investor sentiment.

European Central Bank President Mario Draghi on Thursday hinted that more stimulus measures may come in March as the downside risks such as global uncertainty, market volatility and geopolitical tensions have increased.

Crude oil for March delivery are currently up $0.11 at $29.64 a barrel. Crude oil futures rallied Thursday as traders bet the recent collapse in energy prices was overdone.

Thursday, the Australian, the New Zealand and the Canadian dollars rose against their major counterparts amid the rebound in oil prices.

The Australian dollar rose 1.32 percent against the U.S. dollar, 1.46 percent against the yen and 1.43 percent against the euro. The NZ dollar rose 1.89 percent against the U.S. dollar, 2.30 percent against the yen and 1.74 percent against the euro. The Canadian dollar rose 1.64 percent against the U.S. dollar, 2.27 percent against the yen and 1.76 percent against the euro.

In the Asian trading, the Australian dollar rose to a 9-day high of 0.7021 against the U.S. dollar and a 1-week high of 82.79 against the yen, from yesterday's closing quotes of 0.6998 and 82.36, respectively. If the aussie extends its uptrend, it is likely to find resistance around 0.71 against the greenback and 86.00 against the yen.

The aussie advanced to 1.5454 against the euro, from yesterday's closing value of 1.5532. On the upside, 1.52 is seen as the next resistance level for the aussie.

Against the New Zealand and the Canadian dollars, the aussie edged up to 1.0738 and 1.0013 from yesterday's closing quotes of 1.0711 and 0.9981, respectively. The aussie may test resistance around 1.09 against the kiwi and 1.01 against the loonie.

The NZ dollar rose to 0.6547 against the U.S. dollar and 77.19 against the yen, from yesterday's closing quotes of 0.6525 and 76.81, respectively. The kiwi may test resistance near 0.66 against the greenback and 79.00 against the yen.

Against the euro, the kiwi edged up to 1.6581 from yesterday's closing value of 1.6633. If the kiwi extends its uptrend, it is likely to find resistance around the 1.51 region.

The Canadian dollar rose to a 9-day high of 82.74 against the yen, from yesterday's closing value of 82.48. If the loonie extends its uptrend, it is likely to find resistance around the 86.00 area.

Against the U.S. dollar and the euro, the loonie edged up to 1.4253 and 1.5444 from yesterday's closing quotes of 1.4265 and 1.5509, respectively. The loonie may test resistance near 1.40 against the greenback and 1.51 against the euro.

Meanwhile, the safe-haven yen fell against its major rivals amid rising risk appetite.

Data from Nikkei showed that the manufacturing sector in Japan continued to expand in January, albeit at a slightly lower pace, with a PMI core of 54.2. That was shy of expectations for 52.8, and it was down from 52.6 in December, although the index remained well above the boom-or-bust line of 50 that separates expansion from contraction. The yen fell to 3-day lows of 167.81 against the pound and 117.95 against the U.S. dollar, from yesterday's closing quotes of 167.35 and 117.67, respectively. If the yen extends its downtrend, it is likely to find support around 172.00 against the pound and 119.00 against the greenback.

Against the euro and the Swiss franc, the yen edged down to 128.16 and 117.00 from yesterday's closing quotes of 127.91 and 116.79, respectively. The yen may test support near 130.00 against the euro and 119.00 against the franc.

Looking ahead, European Central Bank President Mario Draghi and European Central Bank member Benoit Coeure will participate in a panel discussion at the World Economic Forum in Davos at 2:45 am ET in the pre-European session.

Flash PMI reports from major European economies for January and U.K. public finance data and retail sales data, for December, are due to be released later in the day.

At 3:30 am ET, German Bundesbank President Jens Weidmann is expected to speak at Symposium in honor of Professor Hans-Werner Sin in Munich.

Shortly after Bank of Austria Governor Ewald Nowotny will speak at the economic reporters' club in Vienna.

At 7:00 am ET, Bank of England Deputy Governor Jon Cunliffe will deliver a speech titled "The Bank of England in Europe: Does European Union Membership Constrain Non-Euro Central Banks?" at the Bruegel Research Institute in Brussels.'

Subsequently, Irish central bank Governor Philip Lane will deliver his first speech, in Dublin.

In the New York session, Canada CPI data for December and retail sales data for November and U.S. existing home sales data and leading indicator, both for December, are slated for release.