Commodity currencies slipped on Monday while the safe-haven yen gained ground after major crude exporters failed to agree on an output freeze, sending oil prices tumbling once again.
A plan to cap production at current levels fell apart on Sunday at a meeting in Doha after Saudi Arabia demanded that Iran join in, leaving the credibility of the OPEC producer cartel in tatters and the world awash with unwanted fuel.
Crude prices slid by as much as 7% in early trade as investors got their first chance to react to the news, but they had clawed back around half of those losses by 1200 GMT.
"The impact of that failure to reach a deal among the oil producers was rather short-lived. Investors were expecting a stronger impact, and that's not materializing," said Credit Agricole's head of G10 currency research Valentin Marinov.
Marinov said that even if a deal had been reached, it would not have done much to stem supply, as the proposed freeze was near record output levels, and added that the U.S. driving season could prop up oil prices.
The Canadian dollar, which tends to move in sync with crude prices because of the Canadian economy's reliance on oil exports, had earlier fallen as much as 1.4% but trimmed those losses to trade down 0.7% on the day, at C$1.2919.
The Australian dollar, another commodity currency, was down 0.3% on the day at $0.7707 after earlier trading more than 1% lower at $0.7594.
Commerzbank currency strategist Esther Reichelt, in Frankfurt, said the failure to reach a deal was likely to spur central banks such as Sweden's Riksbank to talk about further easing, because of the deflationary effect of cheaper oil.
With the fall in crude prices sapping risk appetite, investors sought refuge in the yen, which hit its highest against the euro since April 4, 2013—the day the Bank of Japan launched its massive asset buying program—before easing back a little.
Against the dollar, it almost touched a 1-1/2-year high before easing back to 108.255 yen per dollar, still up half a%.
The United States has given a cool response to concerns voiced by Tokyo that the yen's gains are too sharp and may justify intervention. Treasury Secretary Jack Lew said at a G20 meeting on Friday that he did not see any disorderly moves in the currency market.
"Intervention in the yen has effectively become difficult," said Masashi Murata, currency strategist for Brown Brothers Harriman in Tokyo.