Forex Investment and Currency Trading

The US dollar is on a rampage, taking back it’s recent losses with a vengeance.  There was an article in the Wall Street Journal this morning forecasting the Fed would only cut the overnight rate by 25 basis points at the next meeting (Apr 30) and then pause to re-assess the situation.  This is positive news for the US because the Fed would still be slashing and burning if things still looked dire with no end in sight.  It looks like the Fed might finally get the opportunity to take a breath amidst the chaos.  We also had some weak [...]

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Talk about riding a rollercoaster!  After the Bank of Canada cut the overnight rate by 50 basis points, USDCAD rallied to a high of 1.0154.  The accompanying statement was a bit mixed with the market focusing on the statement that the US slowdown will likely be deeper and more prolonged that initially expected.  A longer US slowdown is NOT good for Canada and people started selling the Canadian dollar.  However, we didn’t go screaming towards 1.02 because the Bank of Canada also indicated they will take a step to the sidelines and watch domestic and global developments before deciding what [...]

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Carry trades were unwound overnight as increasing risk aversion saw low yielders outperform high yielders across the board. Equities drifted lower in both Asia (Nikkei down 1.05%, HSI 1.35% lower) and Europe (down ½-1%) in line with the flight-to-quality bid, as credit concerns were once again in the spotlight with news that Citigroup is currently in talks to sell $12bn of loans at a loss to Apollo Management, Blackstone Group LP and TPG Inc LP, sparking fears that other leveraged loan players maybe suffering similar problems with their leveraged loan portfolios. In terms of data, the only release of note [...]

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For nearly 6 months now USD/CAD has straddled an exceptionally narrow seven big figure range between 0.97 and 1.04, oscillating above and below parity. This behavior of a currency caught between a rock and a hard-place is well justified and likely to persist in the months ahead, although we anticipate a slight bias toward CAD strength within a 0.95 – 1.05 range in Q2/Q3. Protecting USD/CAD’s downside, notably below 0.95, are considerations of valuation. PPP is important for USD/CAD than most currencies, as Canadians have the capacity to vote with their feet and shop south of the border, as they [...]

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