GFX Morning FX Commentary August 16th, 2013

Good Morning,

Today’s expected range for the Canadian Dollar against the US Dollar is 1.0285-1.0360

Today’s expected range for the Canadian Dollar against the Euro is 1.3750-1.3830

Today’s expected range for the Canadian Dollar against Sterling is 1.6120-1.6200

The US Dollar is marginally stronger this morning in quiet overnight trading conditions as the markets are digesting the dramatic sell-off in the US stock markets yesterday. In reaction to the US benign inflation report and the big drop in the new jobless benefits claims yesterday the Dow Jones fell over 200 which is the 2^nd day of triple digit losses, all of this put pressure on the US Dollar to push higher and we saw a bit of that yesterday morning. Investors are becoming more convinced that the economic statistics will allow the US Federal Reserve to start to turn off the taps on stimulus, given that stimulus is squarely tied to the unemployment level for currency markets the September US Unemployment report will again become front and center.

For these readers that do business in India you are most likely aware of the recent weakening in the Rupee. The Rupee has been under assault dropping over 6% since the end of July, USD.INR was at 58.50 on July 26^th and has now reached a high of 62.00. The Government has reacted to this move by controlling the amount that local companies can invest overseas, tightened the cash supply, restricted the use of FX derivative contracts and but a curb on gold imports. As imports begin to rise in price the economy is starting to stagger so the government has been forced to react but I get a sense that the effect on the economy is becoming quite dire. What I think we are also seeing is a move by large scale investors to moving their investments out of emerging markets countries and back into tradition financial markets as those markets are starting to produce better and better economic numbers. Mexico is another emerging market currency that has been under pressure lately but not as significant as the Rupee at the moment.

The Canadian Dollar continues to hover within tight ranges against the US Dollar as most movement for the Loonie comes against the Euro and Sterling. I still favour a rise back towards 1.0400 for USD.CAD especially if the US Federal Reserve does announce a tapering of their stimulus program, ahead of that I think any short-term strength for the Canadian Dollar will be limited

Up today we get some secondary US data including US housing data and Consumer Confidence, we are expecting both numbers to be positive so we may see some enhanced volatility around their release but with equities looking to recover a bit today we could see USD.CAD pullback towards the 1.0300 level and possibly a bit lower

Have a great weekend

Mike

GFX Morning Currency Rates
Currencies	7:00am Today's Opening				Yesterday's Opening
USD/CAD		1.0324			1.0325
CAD/USD		0.9686			0.9695
EUR/USD		1.3336			1.3284
EUR/CAD		1.3772			1.3716
STG/CAD		1.6152			1.6087
AUD/CAD		0.9478			0.9457
CAD/JPY		94.35			95.08
CAD/CHF		0.8964			0.9057
CAD/HKD		7.4873			7.4899
CAD/CNY		5.9224			5.9177
CAD/MXN		12.4509			12.3687
Commodities
Gold		$1,365.00			$1,335.00
OIL		$107.50			$107.58
US DOLLAR INDEX
P.CLOSE		81.18			81.76
OPEN		81.26			81.61
US 10YR YIELD		2.75%			2.71%