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- Sep 14, 2007
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A falling U.S. dollar and surging crude oil prices pushed the Canadian dollar up more than 1.5 cents to 81.79 cents (U.S.) in early trading Thursday.
“We are seeing the U.S. dollar continue to reel against almost every major currency in the wake of the very aggressive action by the Federal Reserve Board yesterday, and it`s also spilling into a number of commodity prices,” Bank of Montreal economist Doug Porter said in an interview.
“For instance, we have seen oil far higher yet again today, pushing up to $52 a barrel,” he said.
“Both these things are like catnip … for the Canadian dollar.”
On top of that, Statistics Canada`s report on the Canadian inflation rate likely added an additional boost to the Canadian currency.
Prices rose 1.4 per cent in February from a year earlier, driven by higher food and shelter costs, Statistics Canada said Thursday.
“Normally, you don`t think of inflation as being positive for a currency. But in this particular case, the fact that Canada is further away from deflation puts a wee bit less pressure on the Bank of Canada to completely follow in the Fed`s footsteps,” Mr. Porter said.
Mr. Porter said the U.S. dollar “is absolutely on its heels at this point,” following the U.S. Federal Reserve Board`s decision to purchase up to purchase $300-billion in longer term Treasury securities.
Bank of Nova Scotia currency strategist Sacha Tihanyi said in a research note that the move took the currency markets by surprise.
“As we have seen repeatedly, when a central bank announces the intention to … purchase longer term government bonds through the creation of reserves, the currency market immediately reacts negatively and pushes the currency in question down,” Mr. Tihanyi wrote.
“Yesterday`s reaction kept to the script and the U.S. dollar was immediately and heavily sold against all comers, with the euro skyrocketing 3 per cent against the greenback, sterling not too far behind and the Canadian dollar gaining 2.3 per cent [against the U.S. dollar Wednesday],” Mr. Tihanyi said.
“We are seeing the U.S. dollar continue to reel against almost every major currency in the wake of the very aggressive action by the Federal Reserve Board yesterday, and it`s also spilling into a number of commodity prices,” Bank of Montreal economist Doug Porter said in an interview.
“For instance, we have seen oil far higher yet again today, pushing up to $52 a barrel,” he said.
“Both these things are like catnip … for the Canadian dollar.”
On top of that, Statistics Canada`s report on the Canadian inflation rate likely added an additional boost to the Canadian currency.
Prices rose 1.4 per cent in February from a year earlier, driven by higher food and shelter costs, Statistics Canada said Thursday.
“Normally, you don`t think of inflation as being positive for a currency. But in this particular case, the fact that Canada is further away from deflation puts a wee bit less pressure on the Bank of Canada to completely follow in the Fed`s footsteps,” Mr. Porter said.
Mr. Porter said the U.S. dollar “is absolutely on its heels at this point,” following the U.S. Federal Reserve Board`s decision to purchase up to purchase $300-billion in longer term Treasury securities.
Bank of Nova Scotia currency strategist Sacha Tihanyi said in a research note that the move took the currency markets by surprise.
“As we have seen repeatedly, when a central bank announces the intention to … purchase longer term government bonds through the creation of reserves, the currency market immediately reacts negatively and pushes the currency in question down,” Mr. Tihanyi wrote.
“Yesterday`s reaction kept to the script and the U.S. dollar was immediately and heavily sold against all comers, with the euro skyrocketing 3 per cent against the greenback, sterling not too far behind and the Canadian dollar gaining 2.3 per cent [against the U.S. dollar Wednesday],” Mr. Tihanyi said.
