Currency Snapshot for Tuesday August 17, 2010

Here are this morning's opening  interbank mid-market rates:

USD/CAD  1.0375                  EUR/CAD  1.3376                        JPY/CAD   0.01225

GBP/CAD  1.6332                  CHF/CAD 0.9963                        AUD/CAD  0.9339

Commentary:

The Euro rose against the USD and the Yen on Tuesday as results from Irish bond auctions showed a solid demand alleviating concerns about heavily indebted euro zone countries. Ireland comfortably sold its allocation of 2014 and 2020 bonds at bid-to-cover ratios of more than three times. Also strong sales of 12- and 18-month Spanish treasury bills held to swing  risk sentiment from aversion to appetite. The Euro later gave up the 1.29 handle after German ZEW institute's measure of investor and analyst sentiment dropped well below forecasts, though this was partly offset by an unexpectedly sharp jump in the current conditions index. Meanwhile, the GBP has been struggling after softer than expected U.K. consumer prices showed that the July core CPI grew by 2.6% from 3.1%, its slowest pace since Nov 2009. This puts tomorrow's release of the minutes of the last monetary policy committee on the radar. If the minutes are dovish and or any form of quantitative easing was discussed or even voted for by some members, then the GBP will come under renewed pressure. In Asia, the good news for the Japanese was that the Yen had finally stopped rising. Selling by Japanese exporters also weighed on the USD. But further Yen gains were capped by concerns about possible moves by Japanese policymakers to stem the Yen's rise. Rumours of an upcoming meeting between Prime Minister Naoto Kan and the central bank governor are keeping a lid on the Yen for now. In Canada, the CAD continued its climb this morning after Potash Corp. of Saskatchewan said it rejected an unsolicited $38.6 billion takeover offer from BHP Billiton Ltd., the world’s biggest mining company. The world's largest fertilizer company termed the proposal as "grossly inadequate," and adopted a shareholder rights plan. The fact that a deal this size could be in play has boosted the CAD because a potential acquiring foreign firm would need the local currency to finance an acquisition. Also spurring CAD strength was the rise in Crude oil, the nation’s largest export, which climbed as much as 1.5% a barrel.