Loonie Rallies as Risk Appetite Pushes Commodity Prices Up

By TraderVox.com

Tradervox.com (Dublin) – The loonie has made a spirited move against the greenback after a three day decline. The move was precipitated by the increased demand for commodities which was as a result of increased risk demand as global conditions seems to favor risk. The US unemployment claims data, the Spain downgrade by the S&P which has added pressure on Spain to request bailout, and the positive consumer confidence report expected from the US are some of the indicators showing better economic times ahead. The loonie increased against the dollar as data from Canada showed that Canadian trade deficit narrowed in August month.

Talking about the trade deficit data from Canada, Chris Gaffney, a chief investment officer from St. Louis at Everbank Wealth Management Inc, the market is being driven by the news from Italy on Italian bond auction which has turned the market risk-on. He added that the trade deficit data from Canada is only adding to that trend. At the Italian bond auction, 3.75 billion euros-worth of benchmark three-year bonds was sold at 2.86 percent, which is more than 2.75 percent they were sold at the previous auction.

According to Blake Jespersen, Foreign Exchange Managing Director in Toronto at Bank of Montreal, the high overall positive risk sentiment in the market has pulled the Canadian dollar against the US dollar. He noted that there was a fair rally of the yen in the previous session as oil prices rose and equity markets rallied. A Statistics Canada report released today in Ottawa showed that the Canadian merchandise trade deficit narrowed in August more than the market forecast. The Canadian currency rose by 0.3 percent against the US dollar to exchange at 97.86 cents per dollar at the close of trading in Toronto yesterday.

Risk appetite pushed crude oil prices up by 1.2 percent which the standard and poor’s GSCI Index of 24 raw materials rose by 1.1 percent. Crude oil is Canada’s largest export commodity.

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