The Canadian dollar stagnated overnight, as did the rest of the G-10 major currencies. The U.K. and U.S. are closed today for the Spring Bank Holiday and Memorial Day, respectively. Those regions represent close to two-thirds of the daily FX turnover, which explains the narrow ranges.
The Chinese yuan was a big mover, reaching levels last seen in 2018. USD/CNY dropped from 6.5764 on March 31 to 6.3718 today. Chinese authorities are taking note. The People's Bank of China raised the FX reserve requirement for financial institutions to 7% from 5%, effective June 15.
A former PBoC official said the yuan strength may signal short-term speculation. He said, "We will prevent short-term money flooding from pushing up the yuan and diminishing the competitiveness of export firms."
However, other analysts suggested, the strong currency is partially offsetting rising inflationary pressures from higher commodity prices.
Traders largely ignored Chinese economic reports. May Non-Manufacturing Purchasing Managers Index was 55.2 vs forecast 52.7, and Manufacturing PMI ticked down to 51 from 51.1 in April.
The Organization for Economic Cooperation and Development raised its 2021 forecast for global economic growth to 5.8% from 4.2% in December. They predict 2022 growth at 4.2%, which if it occurs, would return the global economy to pre-pandemic levels. They warned that the biggest risk to the recovery was failing to provide adequate vaccines to emerging and low income countries.
Canada March Gross Domestic Product data is released Tuesday. It is forecast to rise 0.9%, a tad slower than the 1.1% rise in February, due to Canada experiencing a third-wave coronavirus outbreak. The results will likely be ignored as traders are looking ahead to a robust, post-pandemic economic recovery in Canada.
The drop in USD/CNY helped underpin EUR/USD. The single currency traded in a $1.2184-$1.2203 range. There were not any economic reports of note. EUR/USD technicals are bullish and looking for another test of $1.2250.
The Canadian dollar is rangebound. USD/CAD is stuck in a $1.2040-$1.2140 band, albeit with a negative bias. Rising oil prices are supporting the Canadian dollar.
West Texas Intermediate rose to $67.29 a barrel overnight because of expectations that improving global economic growth will increase demand for crude.
Today’s Canadian data includes Raw Materials Price Index, Industrial Production, and Current Account.
Rahim Madhavji is the President of KnightsbridgeFX.com, a Canadian currency exchange that provides better rates than the banks to Canadians
