By TraderVox.com
Tradervox.com (Dublin) – The Canadian dollar weathered the demand for safety sparked by poor Chinese PMI to post a second monthly gain against the US counterpart as speculations Federal Reserve and European Central Bank might extend liquidity operations increased the Canadian dollar demand. The Canadian dollar has increased by 1.4 percent in July after posting a 1.6 percent gain in June. The increased demand for commodity related currencies has been sparked by speculations that the ECB will act to lower bond yields in Italy and Spain. The Canadian currency also posted this gain as the Federal Open Market Committee prepared to meet for their two day meeting.
Charles Arnaud, an Economist at Nomura Holdings Inc in New York noted that investors are looking at what the Fed and the European Central Bank officials will do in their respective reports this week. He added that the good run posted by the Canadian dollar has been pegged, in part, on speculation that ECB of Fed will make some form of easing. However, according to Todd Elmer of Citigroup Inc, the recent gains in commodity related dollars of South Pacific and Canada together with the Norway Krone and Swedish krona may increase further if the Chinese data improves.
In addition to these comments, Todd Elmer also suggested that the rise in riskier currencies is modest than it had been anticipated as they are closely tied with the euro. Depending on ECB’s action, there might be more risk-currency buys in this week and the coming week. The Canadian dollar has however started the month on a wrong footing as the demand for risk diminished after China’s PMI came in lower than the market had expected.
The Canadian currency closed the month at C$1.0031 per dollar, increasing by 0.2 percent on July 31.
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