Dollar weakness was prevalent today versus higher yielding currencies as market players shift out of the greenback. New Year asset allocations by big institutional investors are driving the recent declines for the dollar as larger players identify their investment strategies for the New Year which appears to be short on the dollar.
The release of the TICS Long Term Purchases showed foreigners were purchases of large quantities of American securities as investors return to US equity markets and bond markets that were shunned following the financial crisis. TICS rose to 85.1 Bn on expectations of only 43.4 Bn.
The Canadian dollar fell following a dovish monetary policy statement as the Bank of Canada held interest rates steady at 1.00%. Economists were looking for stronger rhetoric from the BOC and hopes of higher future interest rates.
At the end of the trading day, the EUR/USD finished higher at 1.3380 after opening at 1.3314. The USD/CAD traded higher at 0.9922 following an opening day price of 0.9858. The AUD/USD was stronger at 0.9970 from 0.9937. US equities were stronger which fed into the risk taking environment as the Dow Jones Industrials traded higher at 11,837.93, up 0.4%.
Traders today will be following the release of the US building permits as well as the BOC Monetary Policy Report which may see an upward revision to the Canadian economic outlook for 2011 and 2012. Support and resistance for the USD/CAD are found at the February 2010 low at 0.9710 and the October and November lows at 0.9980.