The Canadian dollar strengthened today, extending its rally against the U.S. dollar for a third day, as the equities rebounded, improving the risk sentiment and increasing the appeal of the currencies tied to growth.
The loonie’s moves are 89 percent correlated to the Standard & Poorâs 500 Index and 65 percent correlated to crude oil. The 100 percent correlation would mean that the Canadian currency would always move in tandem with the S&P 500 and crude. Russia plans to add and the Canadian dollar to its international reserves, concerned with the recent volatility of the U.S. dollar and the euro. According to the representative of Russia’s central bank, the bank “added the Canadian dollar but hasnât yet begun operations”.
The European crisis still threatens to derail the global economy, taking away part of the loonie’s strength and making the central bank cautious in further increases of the interest rates. Mark Carney, the Governor of the Bank of Canada, said today:
Given the ongoing uncertainty surrounding the outlook, any further reduction of monetary stimulus would have to be weighed carefully against domestic and global developments.In light of the scale and volatility of these conflicting forces, it should be evident that no particular path for monetary policy is preordained.
He also remarked that “the current economic outlook is neither as robust as recent data indicate nor as dire as current headlines scream”.
USD/CAD traded near 1.0246 today as of 19:06 GMT after it opened at 1.0252. EUR/CAD declined to 1.2609 from its opening rate of 1.2642.
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