CAD Strengthens on Hopes Financial Disaster in USA Can Be Avoided

  December 31st, 2012 at 19:13, Vladimir Vyun

LooniesThe Canadian dollar gained today, rising against its US counterpart, as the risk-positive sentiment dominated the Forex markets, driving investors to riskier currencies with higher yield.

The combination of spending cuts and tax increases, which was called “fiscal cliff” in the media, concerned market participants as it might push the US economy into recession. Traders are hoping that some sort of a last-minute deal will be made by US politicians to reduce the budget deficit and prevent the crisis. Many analysts do not believe that time has left for reaching such an agreement, yet that does not necessary means a disaster for the United States. Quite a few economists believe that tax hikes and spending reductions will be implemented gradually and their impact will not be disastrous for the economy.

The euro was one of the biggest losers today as speculators turned their attention to the problems of the eurozone. It looks almost like traders just need to fear something even amid good news. The yen was also rallying to the downside, but that could be expected from all the pressure Japanese policy makers are putting on the currency.

USD/CAD fell from 0.9962 to 0.9930, but trimmed its losses to 0.9957 as of 19:13 GMT today. EUR/CAD dropped from 1.3166 to 1.3127 and its daily low was at 1.3095. CAD/JPY jumped to 86.96 (the highest settlement since April 12, 2011) from the opening price of 86.36 and the intraday low of 85.92.

If you have any questions, comments or opinions regarding the Canadian Dollar, feel free to post them using the commentary form below.

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