Loonie continues its rise on US positivism

Loonie continues its rise on US positivism

09-05-2009 15:12

With equities and commodities rising and resumed optimism among traders, the Canadian Dollar continued its rally at the end of this week’s trading session. The Loonie also benefited from positive data from the US and Canada. The Group of Twenty Finance Ministers and Central Bank Governors (G20) affirmed that the worldwide economy becomes more stable, while it’s too early to retrieve incentives and the focus should be on creating exit plans, commented German junior finance minister Joerg Asmussen today.

US positivism

The Canadian Dollar benefitted from rising equities in Toronto as it also gained on the back of a report released in Ottawa demonstrating a 27,100 increase in employment, reversing July’s pessimistic data. Today, markets were moved globally by a US report demonstrating less job losses than estimated, resulting in a negative market sentiment in equity markets globally. The report also impacted the crude oil levels and commodities, which prices influence the Loonie directly as Canada is one of the main oil suppliers worldwide. The Loonie was affected negatively by Canada's central bank stating that measures may be necessary in order to depreciate the nation’s currency, resulting in negative patterns for the Canadian Dollar. Nevertheless, presently the positive sentiment is quite strong, creating an inevitable bullish pattern for the Canadian Dollar.

Further rise

Currency analysts believe that the Loonie could climb to the levels prior to the national bank announcements, when the US Dollar reached a rate of 1.0630, if the positive sentiment in stock and commodities markets continues. However, it is difficult to define if the Canadian Dollar’s bullish pattern will be able to continue its rise as the country’s central bank already reported its point of view on higher Loonie rates.

Stabilization

The statements by Asmussen came on the sidelines of an assembly of treasury ministers and central bank leaders from the G20 that aims on creating the foundation for the next G20 meeting in Pittsburgh on September 24-25. Asmussen continued by saying: “Nobody has confirmed that the slump has already ended, although the situation becomes more stable. No one has stated that we have to retrieve today the measures that seek to increase the size of the money supply of monetary policy, fiscal policy and financial market stabilization. Nevertheless, a convention determines that we have to create a coordinated and cooperative strategy to retrieve incentives in the future. He also commented that there has not been a conversation concerning an international financial transaction fee. “The discussion focused on objectives instead of instruments.”

International fee on financial deals

The Berliner Zeitung published a report today in which Peer Steinbrueck, the German Federal Minister of Finance, opts for reviewing with the G20 officials the launch of an international fee on all financial deals. Steinbrueck stated in a communiqué to the central bank heads and G20 treasury ministers that the individual liability of top bank management should be enlarged and banking supervision authorities should have more power to urge banks to tighten capital restrictions.