Good news this morning out of Canada regarding their unemployment figures has propelled the Canadian dollar (CAD) to a one year high. The unemployment rate dropped from 8.7% to 8.4% as the Canadian economy unexpectedly added some 30,000 workers. CAD is up across the board, most notably against the Japanese yen (+2.16%), the Kiwi (+1.93%) and the Euro (+1.15%).
Its also up against the US dollar (+.81%) as the dollar has found its own strength with some jaw-boning from Ben Bernanke early this morning. The dollar is up most vs. the yen (+1.32%) as well as the other Majors. This also falls in-line with with my previous commentary on the Yen, that 88 appears to be a short to mid-term bottom. Rumors that the Japanese would intervene at that level are also contributing to Yen weakness today (see CAD and all other crosses).
Questions remain about when the Fed might act, but don’t forget that the currency market is forward-looking, so any indication that Bernanke may be willing to raise rates or remove QE is seen as positive for the US dollar, despite the fact that Big Ben maintained the Fed Mantra “for an extended period” in his statement regarding accommodative policy.
One thing to note about Bernanke’s comments is that he will tighten when the economy “has improved sufficiently”. What this means is anyone guess but as I have stated in other comments, this could be sooner than later.
The other side of the coin is that the US economy is NOT recovering, which could lead to further dollar declines. However, pressure coming from abroad may force Bernanke’s hand sooner than he’d rather move.
So once again all eyes are on Bernanke. Let’s see what happens.
Tags: Bernanke, cad, canada, comments, currenc, currency, currency market, dollar, economy, EUR, Euro, falls, fed, Il, intervene, Japan, Kiwi, Mike Conlon, news, rate, short, unemployment, Yen
