RTTNews - Wednesday in Asia, the Canadian dollar jumped to a fresh multi-month high against the U.S. currency as the crude oil prices traded above $62 a barrel today as a jump in U.S. consumer confidence reinforced expectations that the worst of the recession is over in the world's largest oil-consuming nation.
The Canadian dollar also soared to new multi-week highs against the yen and the euro.
Crude oil for July delivery was at $62.51 a barrel in Asian deals today. London Brent crude traded at $61.20.
Oil prices are now double the four-year low of around $33 struck in December, as rallying equity markets sparked hopes that recent government stimulus measures will increase the speed of a global economic recovery.
U.S. consumer confidence posted its biggest monthly jump in six years and rose in May to its highest level in eight months, jumping to 54.9 in May from a revised 40.8 in April, the Conference Board said yesterday, giving hopes of improvement in the U.S. and the global economy.
Reinforcing market views that the worst of the global economic crisis may be over, Japan's exports showed modest signs of recovery in April with shipments to China declining at a slower pace than a year earlier.
Yesterday's U.S. consumer confidence data was the latest in a growing line of reports that have shown improved U.S. economic growth and weighed on the safe-haven status of the greenback, allowing the Canadian dollar to rally from a four-year low it hit in early March.
Japan's exports rose in April for the second month running, data showed today, providing another sign that the slump in global trade may have bottomed.
The more upbeat sentiment comes after North Korea rattled investors this week by carrying out a nuclear test, although analysts expect market impact to be short-lived.
Concerns the United States could lose its AAA rating as it ramps up borrowing to feed a widening budget deficit has also weighed on markets since last week.
However, the sale of $40 billion in two-year U.S. Treasury notes on Tuesday was met by strong interest, especially from overseas, suggesting there are willing buyers of U.S. debt.
The Canadian dollar also advanced as the Bank of Montreal posted a stronger than expected quarterly profit, and said it was cutting 1,100 jobs, sending Canadian bank shares higher yesterday as investors bet that other big lenders reporting this week will also notch profits.
Canada's fourth-largest bank said yesterday it was cutting its 37,000-strong workforce by 3 percent across all operating groups in a move it said would save money down the road.
Bank of Montreal shares rose 4.6 percent to $43.47 on the Toronto Stock Exchange, while the broader financial index powered 4.1 percent higher, as BMO kicked off earnings season for the nation's Big Six banks.
The Canadian dollar, which closed yesterday's trading at 85.15 against the yen rose to a 16-day high of 85.82 during Asian deals on Wednesday. The next upside target level for the loonie-yen pair is seen at a multi-month high of 85.97.
Japan saw a merchandise trade balance of 69.0 billion yen in April, the Ministry of Finance said today, marking the third straight month of surplus. The April figure came in far better than expectations for a 69.5 billion yen deficit following the revised 10.3 billion yen surplus in March.
Exports plummeted 39.1 percent on year, the data showed, falling for the seventh consecutive month. That was smaller than forecasts that had predicted an annual decline of 41.9 percent after the 45.5 percent fall in March. Imports fell 35.8 percent on year, declining for the sixth straight month. Analysts had expected a fall of 38.4 percent on year after the revised 36.6 percent decline in March.
After hitting a new multi-year low of 68.44 against the yen on January 21, the Canadian dollar rebounded and extended its uptrend in the subsequent months. Since then, the loonie-yen pair advanced 20% and reached a 6-month high of 85.97 on May 11.
Although the Canadian currency weakened thereafter, it bounced back after touching a 19-day low of 80.19 on May 18.
During Asian deals on Wednesday, the Canadian dollar climbed to 1.1129 against the U.S. currency. This set the highest point for the Canadian dollar since October 08, 2008. On the upside, 1.10 is seen as the next target level for the Canadian currency. The greenback-loonie pair was worth 1.1161 at yesterday's close.
Extending last year's 20% slide, the Canadian dollar tumbled to a 4-1/2 -year low of 1.3066 against the greenback on March 09, as the U.S. economy, destination of more than three-quarters of Canada's exports, deteriorated and the price of commodities such as crude oil declined amid the weakening global economy. Crude oil accounts for about a tenth of Canada's export revenue.
Canada's currency, called the loonie, depreciated 3% against the U.S. dollar in the first quarter of 2009, which ended on March 31, compared to a 13% loss in the fourth quarter of 2008 ending December 31.
But the Canadian dollar is showing strength since the beginning of second quarter this year as the crude oil prices rebounded and investors stepped out of havens into higher-yielding assets such as stocks amid signs the global economic slump is moderating. Thus far, the loonie has appreciated 12% against the greenback.
The Canadian dollar jumped to a 19-day high of 1.5547 against the euro in Asian deals on Wednesday. This may be compared to yesterday's close of 1.5610. If the Canadian dollar climbs further, it may likely target the 1.552 level.
The euro remained under heavy selling pressure after a report showed yesterday that Germany's gross domestic product posted its sharpest decline since records began in 1970 on weak investment activity and a sharp drop in net exports.
The German economy contracted 3.8% on a sequential basis in the first quarter, the Federal Statistical Office said in a detailed report today. The first-quarter drop in GDP marked an unprecedented fourth successive quarterly contraction for Germany's economy.
The Canadian dollar has strengthened 3% against the euro from a 2-week low of 1.6012 hit on May 13.
During Asian deals on Wednesday, the Canadian dollar surged up to 0.8752 against the Aussie. The next upside target level for the loonie is seen at 0.873. The aussie-loonie pair closed yesterday's New York session at 0.8786.
The Aussie declined after a report showed that economic activity in Australia remained weak in March. According to survey results released today by Westpac Bank and the Melbourne Institute, the leading economic index for March increased by just 0.3 percent compared to February, and was 5.1 percent lower than its level of one year ago.
In the upcoming European session, the French and the Italian consumer confidence reports for May are expected.
From U.S., the National Association of Realtors is scheduled to release its report on existing home sales for April at 10 am ET. Economists estimate existing home sales of 4.65 million for the month.
At 10:30 am ET, the Energy Information Administration is scheduled to release its weekly petroleum inventory report.
The market is also keeping an eye on OPEC ministers, who meet in Vienna on Thursday to consider production policy but are expected to leave output unchanged.
Canada's current account balance for the first quarter is due on Friday, but first-quarter GDP figures next Monday will likely be more important for market direction ahead of the Bank of Canada's next interest rate announcement on June 4.
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