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Strategies & Market Trends : Canadian Dollar
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To: Rob Toor who wrote (52)12/25/1997 1:35:00 AM
From: Ed Huang  Read Replies (1) of 103
 
Rob, Sorry for not getting back to you earlier.

I agree with Tappis' and like to add one more reason I think
it may be relevant to the situation in the last few days. On
Dec 12 the Canadian central bank raised the interest rate by
1/2 % point to 4 1/2 %. That was a big jump. It showed that
the Canadian central bank was some what desperate to try to
halt the slippery slide of the currency. It worked initially,
the March CDN dollar jumped from 70.40 to over 71 in a few
minutes. But within an hour or so the market quickly pushed
it back down to 70.60 level. Which indicated the market was
not satisfied with the 1/2 % rate increase. In this situation,
it's quite discouraging to the CDN central bank who have been
working hard to intervene in the market by selling the U.S.
dollars and then tried their most powerful measure by hiking
the interest rate then found out it was not working. According
to some estimate it needs another 1/2 % rate jump to defend the
CDN dollar because of the current Asian situation. The CDN
central bank can't afford it and probablly feel it's not worth
it to hike the rate again (at least not right away). And they
don't have much US dollar reserve to intervene in the market
strongly. This situation is also quite discouraging to the bulls
and encouraging to the bears, this became one of the reasons to
cause the CDN dollar fell further in the last few days, IMO.

Apparently, for now we need to watch the Asian situation, CDN
interest rate and some other factors to speculate the CDN
dollar. Chart wise, CDN $ is still moving along a down trend
line. We need to see the downtrend line to be broken before we
can expect any meaningful up move. JMHO.

Best of luck.
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