Risk-off leaves commodity dollars in a curious spot

Aussie dollar – The performance of the commodity dollars remains a curiosity today. Global stock markets continue to fall out of bed as they should as fickle leading indicators of the health of the economy. Dealers appear to be treating the rising prices of gold and oil as instant karma for dollars sensitive to commodity performance without looking beyond at the possibility that the global economy could very easily shift to a lower plane for growth. The Aussie has also responded to a report showing a record quarter for capital investment spending by companies reacting to rising demand for raw materials from China and India. The Aussie fell earlier on risk aversion concerns to a session low just north of par with the dollar at $1.0002 to trade all the way back up to $1.0082.

Canadian dollar – While it is difficult to pinpoint, the jolt in the Canadian dollar could be the work of a large investor closing out a short position. On Wednesday the rising greenback shoved the Canadian aside forcing it to as low as $1.0040 U.S. cents as risk aversion rose. However, the rebound today can hardly be vilified purely by rising oil price in London and New York given the threat it poses to global growth. The Canadian dollar coincidentally advanced to $1.0175.

Euro – Investors have quickly concluded this week that the lack of rebuttal to last week’s hawkish comments from ECB member Yves Mersch must mean that his colleagues concur that a firmer monetary convention should be set in place. Whether that means raising rates or indicating that they should be raised has euro-bulls firmly behind the single currency today. Earlier the euro bought $1.3807 with no signs of worry over sovereign debt in the air and boosted by a report showing Eurozone economic sentiment rose to the highest since August 2007.

Japanese yen – The yen’s role as a better safe haven venue than the dollar saw it rally to ¥81.77 and its best since February 8. Falling yields in the U.S. have dulled the appeal of the dollar during the escalation of the Middle Eastern crisis and despite signs that the Japanese government has been successful in fighting deflation, no one promised tighter monetary policy in Japan. To that extent the yen has maintained its power at a time when concerns that the Fed might abandon its ultra-low policy have diminished.

Andrew Wilkinson is a Senior Market Analyst at Interactive Brokers LLC

Note: The material presented in this commentary is provided for informational purposes only and is based upon information that is considered to be reliable. However, neither Interactive Brokers LLC nor its affiliates warrant its completeness, accuracy or adequacy and it should not be relied upon as such. Neither IB nor its affiliates are responsible for any errors or omissions or for results obtained from the use of this information. Past performance is not necessarily indicative of future results.

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About the Author
Andrew Wilkinson

Andrew is a seasoned trader and commentator of global financial markets. He worked for several London-based banks trading cash and derivatives before moving to the U.S. to attend graduate school. Andrew re-joins Interactive Brokers following a two-year stretch at a major Wall Street broker-dealer as their Chief Economic Strategist. His coverage of stocks, options, futures, forex and bonds regularly surfaces in global media, and over the last several years Andrew has made many TV appearances on Bloomberg, BBC, CNBC and BNN and Yahoo Finance.

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