Canadian Forex Review: C$ Fractionally Stronger

By Commodity News Service Canada

Winnipeg – December 11/12 – CNS – The Canadian dollar was trading at a fractionally stronger level versus the US currency in late North American activity on Tuesday. The upswing experienced by the Canadian unit came early in the day and reflected a willingness among investors to take on riskier assets, market watchers said.

The Canadian currency late in the afternoon was quoted at

C$0.9863 (101.38 US cents). This compares with Monday’s late North American quote of C$0.9869 (101.32 US cents).

Some of the firmness in the Canadian currency was also linked to the advances posted by the North American equity sector as well as by global crude oil values, brokers said.

Some of the early strength in the Canadian unit also reflected positive economic news from Germany and strong Canadian trade deficit data.

Statistics Canada reported Canadian merchandise imports were down 1.2% in October while exports rose 1.0%. As a result, Canada’s trade deficit with the world narrowed from C$1.0 billion in September to C$165 million in October, StatsCan said.

Meanwhile, the so-called fiscal cliff, a series of tax increases and spending cuts scheduled to take effect on Jan. 1 in the US, if lawmakers there can’t forge a budgetary agreement, did dampen some of the buying enthusiasm for the Canadian dollar.

Canadian bonds were slightly lower along the yield curve on Tuesday reflecting an increased appetite for more risk-sensitive assets after some positive economic data from Europe, market watchers said.

Hints of potential progress in budget talks in Washington were luring investors away from safer assets, as well.

Canada’s two-year bond yield was at 1.074% Tuesday, from 1.057% Monday. The 10-year bond yielded 1.730%, from 1.702%. Bond yields move inversely to bond prices.

Investors shifted out of safe-haven government bond markets and into more risk-sensitive assets after Germany’s ZEW economic expectations index rose to 6.9 in December, far exceeding expectations of a minus 11.3 reading.

Better-than-expected trade data in Canada and the US was also somewhat negative for bonds.

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