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 As brent crude fell below $37 a barrel on growing fears that a
global oil glut will worsen in the coming months, the Norwegian
crown also fell around half a percent, reversing all its earlier
gains. Norway relies on oil and gas for more than one fifth of its
gross domestic product.
With stock prices falling as investors sold their riskier assets,
the Swiss franc, traditionally bought at times of risk aversion,
rose 0.3 percent to 1.0771 francs per euro, its strongest since Nov.
12. The yen rose 0.2 percent, trading at 120.74 yen against the
dollar.
"Now that we are seeing a breakthrough of Friday's lows in the oil
price and we're seeing a sharp acceleration of the fall, the market
is getting nervous," said Commerzbank currency strategist Esther
Reichelt, in Frankfurt.
The Canadian dollar fell 0.2 percent to C$1.3780, its weakest since
April 2004.
The fall in risk appetite also helped the euro, as investors who had
held euro-funded carry positions, in which they borrow the euro in
order to sell it and buy a higher-yielding, riskier currency, bought
back the single currency. It traded flat on the day at $1.09785.
The euro had earlier weakened to $1.0945 as investors braced for the
first U.S. interest rate rise in almost a decade. The Federal
Reserve's two-day policy meeting will conclude on Wednesday, with
the key question being how quickly the Fed will try to normalize
policy going forward.
RBC Capital Markets currency strategist Adam Cole, in London, said
that investors were underestimating the pace of further interest
rate rises. Markets are pricing in two hikes in 2016, whereas Cole
expects four.
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"I'd rather be long the dollar than short this week," he said. "We
think that a rate hike is pretty much a foregone conclusion but the
commentary that goes with it is likely to be slightly less dovish
than some are expecting."
"This notion of a dovish hike is a little bit misguided, we think,
and relative to those expectations (the Fed meeting) is likely to be
dollar positive," he added.
Earlier, China's yuan hit a 4-1/2-year low in onshore trading after
the country's central bank again lowered the yuan midpoint rate.
That followed Friday's announcement of a new trade-weighted index,
which some viewed as a green light for further devaluation of the
currency.
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