Risk Aversion Waned, Canadian Dollar Went Up

The Canadian dollar made a significant rebound to C$1.1580 as commodities and fuel equities gained.  

The surge of the Canadian dollar against the U.S. dollar was brought about by the easing of risk aversion due to the gains made by commodities and global equities.  

Canadian Dollar Rallies Overnight

The Canadian dollar rallied as high as C$1.1555 against the US currency bringing it to its comfort levels.  The Thursday rally significantly boosted the Canadian currency from its seven-week low it experienced on Wednesday.

George Davis, technical strategist of RBC Capital Markets, said that the overnight rebound of commodities and stocks brought down risk aversion to minimal levels.  Davis also said that the strengthening equity markets pushed the U.S. dollar weaker across the board.  

Stop Loss Orders

Davis also said that the flurry of stop loss order also boosted the Canadian currency as it moved below the C$1.1615 level.  Traders, mainly from London, took away their profits on the U.S. dollar at the end of trading sessions.  

By early morning Thursday, The Canadian currency was pegged at C$1.1580 against the U.S. dollar or 86.36 U.S. cents.  The market closed Wednesday with the Canadian dollar at 1.676 level or 85.65 U.S. cents.   

Commodity Prices Started Going Up

The six-session skid of world oil prices was halted as global crude prices started to move up again.  Gold prices also increased and recovered from its eight-week low that it suffered from the previous trading sessions in the commodities market.

The Canadian economy is a major and key exporter of oil and gold.  The Canadian dollar heavily relies on the performance of these two commodities in the market.  An increase in the prices of commodities such as oil and gold will impact favorably on the Canadian dollar resulting to strong showing of the Canadian currency.   

Canadian Currency Ranging Ahead

Currently, the Canadian dollar is now ranging ahead as the market awaits the announcement of jobs data which will be released Friday.  Experts believed that the data will show 35,000 jobs lost in June while the unemployment rate increased to 8.7 percent compared to 8.5 percent in May jobs data.  

Bond prices at the domestic front also remained low across the curve together with the bigger U.S. Treasury market.  This came about as the Bank of England’s asset purchase program remains unchanged.  

The decision of the Bank of England reduced the appeal of more secured assets such as government debts.