Canadian Dollar Advances on Risk Appetite

Submitted by Tradervox 1 on Wed, 12/09/2012 - 13:36
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Tradervox.com (Dublin) – The Canadian dollar has surged against the US dollar to a 13-month high as increased optimism in the US and Europe is reduced volatility in the market. Te Federal Open Market Committee in the US meets today to start a two-day meeting which will determine whether to start another round of quantitative easing. The US dollar declined against all its counterparts as Moody’s Investor Service warned that it would reduce its credit rating to AA1 if no policy is passed. The Canadian dollar also improved as Federal Constitutional Court in Germany cleared the way for today’s ruling on Germany’s participation in the European Stability Mechanism fund. This is the fund set to buy bonds from countries struggling with high borrowing costs such as Spain and Italy.

David Madani, a Toronto-based economist at Capital Economics Canada, said that the current movement in the loonie is due to sentiments that there will be global stimulus. He noted that monetary policy makers around the world are removing all hurdles to boost economy. The Canadian dollar rose as crude oil futures advanced by 0.4 percent to trade at $96.91 per barrel. According to Camilla Sutton, who heads the Currency Strategy in Toronto at Bank of Nova Scotia, indicated that the Canadian dollar will probably remain higher today against the dollar as ECB has removed tail risk and the Fed may add stimulus to boost US economy. However, loonies advance against the dollar was limited after a report from Canada indicated that trade deficit increased due to slowing exports in crude oil.

The Canadian dollar increased by 0.5 percent against the dollar to trade at 97.30 cents per dollar at the close of trading yesterday. It had touched its strongest level since August 4 last year, when it touched 97.14 cents. This was experienced as the implied volatility on greenback against the loonie for one month options dropped to the lowest level since May 2007 of 6.6 percent.

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