The Canadian dollar reached today the highest level in almost six weeks against the US dollar on the outlook that the central bank would continue to raise the interest rates. The currency slipped versus the euro as doubts about the strength of the US economy remains, which is bad for the Canadian currency as the US is the major trading partner of Canada.
The loonie also rose after the Basel Committee on Banking Supervision gave lenders enough time to comply with the higher capital requirements, easing the concerns that more strict regulations would cripple the banks’ ability to generate profit. Mark Carney said that the economic reason for the higher capital requirements is “compelling” and the regulators have reached “exactly the right balance” to avoid the future crises. He also added that the Canadian and global economy would benefit from the new regulations as the lower probability of the future financial crises offsets the higher borrowing costs.
The Bank of Canada increased the interest rates last week for the third time in less than four months and suggested that it may raise them further this year.
Maria Jones, the currency trader at TD Securities Inc., said:
The interest rate differential and expectations are the main driver of the Canadian dollar right now. The Bank of Canada’s very much wants to normalize rates and that has grounded market expectations and reminded the market that the Canadian economy does have solid fundamentals and interest rate levels are still accommodative and can’t last forever.
David Watt, the senior currency strategist at Royal Bank of Canada, supported this opinion:
The Bank of Canada will raise rates next year and the economy is stronger, which is positive for the Canadian dollar and provides a bullish underpinning. But the underperformance of the U.S. dollar is holding the Canadian dollar back today relative to the rest of the G10 today.
USD/CAD dropped from 1.0270 to 1.0266 today as of 17:46 GMT, following the decline to 1.0214. EUR/CAD rose from 1.3230 to 1.3363 after it slumped previously to 1.3175.
The Chinese yuan reached the strongest level since 1993 versus the US dollar today on the speculation that China’s government would allow the faster appreciation of the currency to avoid the trade sanctions from the US.
The Swiss franc reached parity with the US dollar today for the first time since December 4th 2009 as the demand for the safety grew on the concerns for the global recovery and the stocks declined.
The Japanese yen strengthened today after Naoto Kan, the Prime Minister of Japan, won the vote of the Democratic Party of Japan, beating his rival Ichiro Ozawa.
The Canadian dollar rose as the North American stocks rallied after the hostile bid for the Potash Corp. by the BHP Billiton Ltd., which increased the appeal of the growth-linked assets.
The Japanese yen rose today as the renewed concerns that the recovery of the global economy is losing the traction fueled the demand for the safer assets.
The Australian dollar fell today against the Japanese yen on the speculation that Japan’s central bank will refrain from curbing the yen’s gains and after Australia’s wages growth slowed. The Aussie also dropped versus the greenback.
The Thai baht went up today on the speculation that the fast growth of the Asian nations would attract more investors to the region, increasing the appeal of the Asian currencies.
The Chinese yuan declined today after the US currency rallied and the central bank lowered the reference rate; the increasing exports and the resulting trade surplus weren’t able to support the currency.
The euro endured hard times this year as the financial crisis in the European Union made us question the very existence of the currency. Therefore, the rally it showed this summer was rather unexpected. The experts expected the rally to end soon, perhaps even this month. Does the outlook changed? Not much, though it became somewhat more bullish.
The New Zealand dollar fell today after the report showed that the house prices increased with slower pace, causing the speculation that the central bank wouldn’t raise the interest rates next month.
The South Korean won extended its rally for yet another day as the anticipation that the central bank would raise the interest rates increased the appeal of the currency.
The US currency rose today against the euro and the Japanese yen after the reports showed that the US employers added more jobs than expected and the service industries expanded with increasing pace.
The South African rand fell today as the growing concerns about the global economy, caused by the signs of the US economic expansion�s slowdown, damped the demand for the currencies of the emerging markets.
The Swiss franc fell today against the US dollar and the euro, as the rally of the equities damped the demand for the currency as the safe haven, despite of the favorable fundamentals.
The Great Britain pound strengthened today against the US currency to the highest level in almost six months as the economic data showed that Britain�s economy expanded faster than the analysts anticipated.
The Indian rupee rose today after the central bank increased the interest rates for the fourth time this year, raising the yield on local assets.
The�Swiss franc rose reached today the�highest level this week against the�euro after the�leading economic indicators remained at�the�highest level in�almost four years.
The�US dollar performance was abysmal this week as�concern about the�slowdown of�the�US economic growth persists and�even the�good news weren�t able to�weaken the�fears. The�dollar fell versus all other major currencies this month.
The�Canadian dollar rose against its U.S. counterpart after two days of�decline as�demand for�the�crude oil, the�main Canada�s export, increased and�the�commodity prices rallied. The�loonie performed not so well against other currencies, including the�euro, against which Canada�s currency continued to�fall.
The�Brazilian real advanced today against the�euro on�the�speculation that demand for�the�South American exports would grow as�the�European economic outlook brightened. The�currency declined versus the�greenback.
The�Australian dollar fell today for�a�second day against its U.S. counterpart as�the�in�inflation rose slower than expected, fueling the�speculation that the�central bank would keep the�interest rates unchanged.
The�Polish zloty extended its rally for�the�eighth consecutive day against the�euro as�the�estimates of�the�Economy Ministry showed that the�economy grew with the�increasing pace, igniting the�speculation that the�central bank may raise the�interest rates. The�Polish currency dropped against the�U.S. dollar slightly.