Morning Commentary & Currency Insights – February 16, 2018

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The dollar index has bounced off a 3 year low at 88.25 in Asian trading recovering from Thursday’s surprise sell off after higher than expected U.S. inflation data resulted in a “buy on rumour, sell on fact” mentality resulting in large USD selling to unwind short term long positions.  While U.S. Treasury yields continue to grind higher many in the market are waiting to catch weak dollar longs liquidate further before reinstating a buy USD mentality.  Yen continues to strengthen after Japanese Finance Minister Taro Aso stated the currency’s level & volatility do not require central bank intervention.  With A North American holiday looming on Monday expect markets to wrap up by early afternoon.

USD/CAD has traded to a low of 1.2450 overnight in Asia and has also bounced higher in a general USD move as mentioned.  The Canadian dollar has lagged against other G10 currency gains vs the U.S. dollar as market participants are wary of negative news in the form of NAFTA or BoC rate revelations coming back to haunt the currency.  While volatile markets look as though they will continue the Canadian dollar may see some relatively muted moves comparatively speaking.

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