Canadian Dollar Drops as Oil Declines & Unemployment Grows

The Canadian dollar fell yesterday and extended its drop today after crude oil declined, while unemployment in Canada unexpectedly increased last month and employment growth was lower than anticipated.

The Canadian unemployment rate rose from 7.4 percent in November to 7.5 percent in December, while most specialists in the labor market expected it to stay unchanged. Canadian employers added 17,500 jobs last month, compared to the median forecast of 17,800. That’s still better than a decline by 18.600 in November.

Crude oil was little changed at $101.90 per barrel in New York today after it dropped $1.41 to $101.81 yesterday as US inventories increased and the European crisis damped demand. The performance of the Canadian currency depends on oil prices as crude is the most important export commodity of Canada. Crude oil may yet advance on tensions around Iran, boosting Canada’s dollar.

USD/CAD rose from 1.0195 to 1.0209 and CAD/JPY advanced from 75.56 to 75.66 as of 13:39 GMT today. Meanwhile, EUR/CAD retreated from 1.3038 to 1.3006.

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Earlier News About the Canadian Dollar:

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Canada’s Dollar Suffers from Risk Aversion

The Canadian dollar fell yesterday and continued its decline today against the US currency and the Japanese yen as optimism evaporated from the Forex market. Canada’s currency jumped versus the euro.

This year has started with good market sentiment, which didn’t last long, though. Analysts believe that the weak demand for German bonds and the record spread for Hungary’s credit-default swaps made traders’ mood to shift in favor of risk aversion. It’s not surprising to see pessimism returning to the market considering that Europe ended last year with none of its problems resolved.

The Canadian currency (also known as loonie) is tied to economic growth and as such is vulnerable to the negative impact of Europe’s crisis on the global economy. The loonie may yet receive help from the United States (Canada’s major trading partner) with its recovering economy. Indeed, the good sentiment on Monday was sparked by the signs of improving manufacturing in the USA. For now, though, the Canadian dollar remains weaker against safe currencies.

USD/CAD advanced from 1.0125 to 1.0137, while CAD/JPY fell from 75.68 to 75.62 as of 1:45 GMT today. EUR/CAD traded at 1.3098 today after it slipped from 1.3185 to 1.3104 yesterday.

Canadian Dollar Rises as Commodities Jump

Canadian dollar is higher as commodities see a sharp jump in prices. The latest ISM data in the United States is helping matters, especially for the loonie, but the manufacturing expansion in China and Australia is also helping quite a bit.

With economic data improving for the United States and for other countries, optimism is running high. That means that commodity prices are improving and commodity currencies, like the loonie, are getting a boost.

The Canadian dollar is also benefitting from the good news in the United States since the country is Canada’s biggest trading partner. With news of economic recovery, there are expectations that demand will increase, further helping the Canadian dollar.

Also helping the loonie is a gain in oil prices. Canada relies heavily on oil prices, and the tensions between Iran and the West are putting upward pressure on oil. As a result, the loonie is expected to continue to see solid gains today.

There are still concerns about what’s next for the eurozone, though. Concerns about a European banking crisis are looming in the background, but for now there is a great deal of optimism and risk appetite.

At 14:46 GMT USD/CAD is lower at 1.0103, down from the open at 1.0186. GBP/CAD is also lower at 1.5748, down from the open at 1.5810.

Dollar Drops as Manufacturing Expands in USA & China

The US dollar dropped today as expanding manufacturing in the United States and China damped demand for the greenback as a safe haven. The dollar reached the lowest level in more than a month against the yen.

China’s Purchasing Managers’ Index increased from 49.0 to 50.3 in December, according to the report of the China Federation of Logistics and Purchasing on January 1. Analysts predict that the report of the Institute for Supply Management will show today an increase of PMI from 52.7 to 53.3 last month. The Stoxx Europe 600 Index rose 0.9 percent and the MSCI Asia Pacific Excluding Japan Index advanced 1.2 percent.

EUR/USD rose from 1.2933 to 1.3017 and USD/JPY dropped from 76.88 to 76.72 (the lowest rate since November 18) as of 10:36 GMT today.

Rupee opens at 52.90 per dollar

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The Indian rupee opened at 52.90 per dollar versus 53.66 yesterday.

Pramit Brahmbhatt, Alpari India said, "The rupee might continue to be under pressure on the dollar's strength globally. We may see more intervention from RBI if it weakens further. I don't expect any change in rates in today's Policy. The rupee is seen between 53.50-54.50/$."