GFX Morning Commentary April 10th, 2013

Good Morning,

Today's expected range for the Canadian Dollar against the US Dollar is 1.0125-1.0200    

Today's expected range for the Canadian Dollar against the Euro is 1.3270-1.

Today's expected range for the Canadian Dollar against Sterling is 1.5520-1.5575   

The US Dollar is marginally weaker this morning as better than expected industrial output in France has pushed the Euro a little higher. I am also reading that the Euro is getting a boost from money leaving Japan and moving into higher yielding European debt instruments, it looks like the Japanese investors are putting the carry trade on once again.  This “carry trade” involves an investor borrowing large amounts of a currency (Yen in this example) at extremely low interest rates then converting that currency into another currency and investing in a higher yielding investment in that country, this trade only works when interest rates are low as they are in Japan and the expectation exists that the borrowing currency will drop in value over the lifetime of the investment. With the value of the Yen set to continue to drop in value this theory makes sense but if I was a Japanese investor I am not sure that I would be taking the risk of holding European debt, Australia and New Zealand are two currencies that tend to get stronger when this carry trade is deployed.

Once again not much action for the USD.CAD overnight, we  continue to trade within the broader 1.0150 to 1.0250 trading range with little on the horizon to change that, most of the action will continue to confined to the Euro and Yen, EURO.CAD has reached a new recent high of 1.3300 so I look for lots more volatility in that currency pair than we will see in USD.CAD

Up today we get the release of the minutes from the US Federal Reserve’s meeting last week and investors will be looking for any division on the committee regarding the length of time the US stimulus program will be in place. We may see a bit of volatility around that release this afternoon but otherwise we should have a relatively calm day. Of course if North Korea launches a missile and the US or Japan shoots it down then the currency markets will become very interesting very quickly.

Have a great day

Mike

GFX Morning Currency Rates
Currencies	7:00am Today's Opening				Yesterday's Opening
USD/CAD		1.0146			1.0161
CAD/USD		0.9856			0.9841
EUR/USD		1.0397			1.3034
EUR/CAD		1.3294			1.3247
STG/CAD		1.5533			1.554
AUD/CAD		1.0681			1.0629
CAD/JPY		98.06			97.3
CAD/CHF		0.9168			0.9204
CAD/HKD		7.6278			7.6189
CAD/CNY		6.1017			6.1016
CAD/MXN		11.9628			11.9829
Commodities
Gold		$1,580.00			$1,571.00
OIL		$93.84			$93.62
US DOLLAR INDEX
P.CLOSE		82.45			82.89
OPEN		82.45			82.69