AUS: Canadian dollar outperforms rivals as investors returned to the markets in USD-selling mode today
The Canadian dollar (Currency:CAD) has "reached a new one year high (against the USD) and is outperforming on its crosses leading into the NA open. Slowing global growth is a major concern for CAD traders, particularly as weekend data from both China and Japan disappointed," says a currency note from Camilla Sutton at Scotiabank.
The pound to Canadian dollar exchange rate is 0.32 pct lower than at Friday's close at 1.5623.
The US dollar to Canadian dollar is 0.07 pct lower at 0.9779.
"Investors returned to the markets in USD-selling mode today, reflecting expectations that the Fed will announce more easing measures later this week (extending its forward commitment and more asset purchases, we expect). Despite the interest to sell USDs though, the big dollar has ground steadily higher overall so far," says Sean Osborne at TD Securities.
Risk appetite, which had improved sharply in the aftermath of last week’s ECB decision, has also faded, with European stocks weaker and US futures lower.
Weaker data from China over the weekend may be checking enthusiasm for risk assets and renewed focus on European issues (Greece budget struggles, German constitutional court ruling looms) may be causing a little buyers’ remorse from all those freshly minted long positions established last week. We doubt the negative swing in sentiment will extend far though.
With central bank policies clearly supportive of risk, under-invested market participants likely feel (hope) that there is a chance of the pro-risk mood beating the usual seasonal September/ October market blues and that the Santa Clause rally might come early this year to help boost weak returns.
"If the positive mood does prevail – and we do remain somewhat bemused by the EUR’s positive reaction to last week’s ECB decision (a lot of uncertainties remain, debt crisis unresolved, growth prospects weaker) – the Canadian Dollar is likely to continue benefitting. We have fought the recent trend up in the CAD most of the way and continue to feel that the CAD is somewhat over-extended at current levels. But below the 0.9750/0.98 range, there is only the August low at 0.9728 preventing a shift to an even lower range (possibly retesting 0.9400/50)," says Osborne.
