The Canadian dollar reached a three month peak in Asia but quickly sank under a wave of profit taking, in a thin market.
Wall Street closed with the major indexes near record highs and that positive sentiment fed into early Asia trading. AUD/USD and NZD/USD continued to rally, and the Canadian dollar went along for the ride. The Canadian dollar got an added boost from West Texas Intermediate (WTI) oil prices which climbed to $83.91/barrel following the Energy Information Administration report that U.S. crude inventors decline by 430,000 barrels. Oil traders were expecting inventories to rise by 1.85 million barrels.
Asia equity traders became unnerved, in part due, to renewed concerns about contagion from China’s property developers financial problems. Evergrande Group resumed trading and its shares fell 14% even after officials said they received a three-month extension for the Jumbo Fortune bond payment.
Japan’s Nikkei 225 index dropped 1.87% and Hong Kong’s Hang Seng index fell 0.46%. European equity indexes are down modestly due to negative risk sentiment and profit-taking. Wall Street is poised to open with small losses, although the indexes are still close to record highs. Oil and gold prices are also a touch lower compared to yesterday’s New York close.
U.S. 10-year Treasury yields are within spitting distance of 1.70% and that put the breaks to the recent U.S. dollar selloff.
Yesterday, Statistics Canada reported inflation soared to an 18-year high in September, rising 4.4% compared to 4.1% in August. The news will be concerning to the Bank of Canada as the inflation gains were broad-based. Canadian dollar traders did not react to the news.
EUR/USD rallied to $1.1667 in Asia then dropped to $1.1633 just before New York opened. Gains were capped by the jump in U.S. treasury yields, and by fears rising energy costs and supply chain issues will slow economic growth. A break below $1.1620 will negate the short-term EUR/USD uptrend.
GBP/USD failed to take out resistance in the $1.3830 area and prices dropped to $1.3787 before climbing to $1.3810 in New York.
Today’s U.S. data includes weekly jobless claims (forecast 300k) and Philadelphia Fed Manufacturing Index (forecast 25, previous 30.7)
Rahim Madhavji is the President of KnightsbridgeFX.com, a Canadian currency exchange that provides better rates than the banks to Canadians
