The Canadian dollar advanced today amid increasing demand for the currency from traders interested in high yield as continuous currency wars make it difficult to find.
Carry trade is a practice of borrowing money in countries with low interest rates and investing them in economies where borrowing costs are higher. Such strategy was considered rather profitable, but is hard to perform in the current environment of aggressive monetary easing across the world. The RBA joined the parade, unexpectedly lowering its cash rate today.
Forex traders abandoned the Australian currency and flocked to the Canadian one in search of higher yield as a result of the central bank’s decision. The sustainability of the rally is questionable though as fundamentals in Canada are not shiny and the Canadian interest rates are comparatively low and it is not likely the Bank of Canada will raise them anytime soon.
USD/CAD dropped from 1.0066 to 1.0045 as of 21:38 GMT today. EUR/CAD went down from 1.3163 to 1.3134. AUD/CAD tumbled from 1.0320 to 1.0227 and reached 1.0202 intraday — the lowest level since October 24.
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