USD/CAD 1.0645 EUR/CAD 1.3561 USD/JPY 84.27
GBP/USD 1.5407 EUR/USD 1.2714 USD/CHF 1.0183
Commentary:
Yesterday move by the Bank of Japan to increase QE by providing cheap loans to the banking system instead of currency intervention has given the green light to speculators to bid the Yen higher. Japanese Finance Minister Yoshihiko Noda repeated on Tuesday that the government would take decisive action on currencies -- usually seen as code for intervention -- when necessary. But the reaction in the market was limited as the Yen advances to its fourth monthly gain versus the USD, the longest winning streak in more than 1 1/2 years. Worries that the global economics are cooling are prevailing and are causing masses inflows into safe havens plays such as the Yen, CHF, USD, and gold. This could eventually prompt the BOJ to sell its currency in the markets for the first time in more than six years. However, without the help of a co-ordinated policy response from other G8 nations, who are grappling with their own problems, intervention will prove to be short lived. Also, the collapse of South Canterbury Finance, one of New Zealand's largest finance companies, was leading to some carry trade unwinding in the NZD and AUD against the Yen. In Europe, the CHF advance to a new record high against the Euro and a seven-month peak against the dollar due to risk aversion. Unlike the Japanese situation, traders remained unconcerned about renewed action to stem CHF gains from the Swiss National Bank, which shelved its policy of intervention in June saying deflation risks in the Swiss economy had all but disappeared. Meanwhile, the Euro was stuck within a narrow range but could face increased volatility later as the Federal Reserve is scheduled to release its policy meeting minutes at 2:00 EST. European Central Bank board member Erkki Liikanen said cutting the budget deficit remains a challenge for many countries and argued for increased supervision of the financial markets in an effort to counter the risks for large imbalances during an interview with a Finnish newspaper. The ECB is widely expected to maintain the expansion in monetary policy in place at Thursday's meeting. In Canada, the CAD is down for the second day in a row and is headed for its worst monthly decline since June 2009 as concern about a faltering economic recovery prompting reduced demand for higher-yielding assets. Canada's Q2 GDP grew 2% down from 5.8% in Q1, casting doubt on whether the Bank of Canada will hike interest rates next month.
Disclaimer: Please note that any currency rates/prices contained in this document are indicative, and subject to change without notice. Prices quoted may vary substantially based upon the size of transaction and market volatility.
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