Dollar and yen sparked by commodity weakness

Japanese yen – Asian stocks fell while Tokyo remains on holiday for Golden Week. The MSCI Asia Pacific ex-Japan stock index suffered a 1.4% decline as concerns grew over the potential for reprisal attacks. The yen strengthened to its strongest in more than a month against the dollar where its gains accelerated shortly after New York trading got underway. The yen rose lately to ¥80.70 per dollar.

Canadian dollar – After seven years of minority rule, Canada elected a majority for Stephen Harper’s Conservative party at Monday’s polls securing him a mandate to deliver corporate and personal income tax cuts and a reduction in spending. Dealers rejoiced in the decisive victory strengthening the local dollar to $1.0541 U.S. cents. Ahead of the March call for an election the Conservatives held 143 seats and post-vote will hold 166 as Canada determines the need for majority rule. But as the celebrations began, risk aversion took hold across global markets sending commodity prices lower as dealers took a dimmer view towards growth-sensitive areas. The greenback reversed earlier weakness sending the loonie scurrying for cover and down to $1.0458 U.S.

Aussie dollar – The Reserve Bank of Australia left interest rates alone at the May meeting saying that policy was its current “mildly restrictive” policy stance remained appropriate. Moreover the recent ascent of the local dollar was adding to the stresses for industries most exposed to trade. Governor Glenn Stevens warned that the currency’s strength might yet damage trade ahead. Dealers were not as much disappointed by the RBA’s failure to deliver further monetary tightening today as much as they were forced to further rein in predictions for rate increases in the months ahead. The odds of an October-time rate increase before today’s RBA meeting stood at 62% likelihood of a hike, but following the response the prospect is pretty much no greater than a coin toss. The Aussie was also pressured during European trading by weakening commodity prices, which helped send the unit lower to $1.0850 from Sunday evening’s record high at $1.1012 U.S. cents.

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.

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.

Comments
comments powered by Disqus