The Canadian dollar, and its other higher-yielding rivals, traded within tight ranges as holidays in the European and Australian continents sapped the market’s liquidity. The market’s attention during these trading doldrums seemed to be significantly focused on the US dollar. The greenback opened the last week of April with broad losses against its key G7 rivals, as bearish dollar sentiment continues to loom over the global markets. Investors’ negative outlook on the greenback is largely based on two key developments. First, Standard & Poor’s downgrade warning issued last week increased the uncertainty of correcting America’s swelling debt burden. Second, widening interest rate differentials between the US Fed and its key rivals diminished demand from investors seeking greater returns. The combination of these forces drove the dollar overnight to new historic lows against the Swiss franc, and within striking distance of new 15-month and historic lows against the euro and Australian dollar, respectively.
US dollar
The US dollar fell to historic lows against Switzerland’s franc, and near significant lows against the euro and Australian dollar, as a listless overnight economic calendar renewed investors discomfort with the greenback’s fundamentals. The crux of the dollar’s negative outlook is the amalgamation of the S&P downgrade warning issued last week, and the divergence between dovish Fed monetary policy and inflation hawks in other central banks such as the European Central Bank. The former issue will demand greater cooperation between America’s two political parties, and require them to weigh long-term entitlement cuts and tax hikes.
Swiss franc
Switzerland’s franc strengthened robustly against most of its key rivals in a listless overnight trade, climbing to new historic highs against the US dollar and one-month highs against the UK pound. The franc’s rapid appreciation during the past few months is significantly correlated with the uptick in the value of gold. Gold prices stand at all-time highs, as investor fear from Greece’s and Portugal’s sovereign debt crisis continues to fuel demand for the safe haven commodity.
Canadian dollar
Demand for the Canadian dollar simmered overnight due to the Easter holidays spanning the globe’s top economic powerhouses. The lacklustre trading session allowed the major currency to trade within Friday’s narrow ranges. On a broader scale, the Canadian dollar is within arms length of multi-year highs against its US namesake, as Canada’s healthy economy continues to bolster demand for the loonie.
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