Loonie Follows Aussie in Advance

The Canadian dollar jumped yesterday and so far has kept its gains today as stocks and commodities advanced on speculation that the Federal Reserve will maintain its interest rates record low for prolonged time.

The Canadian dollar followed the Australian dollar that jumped on very good employment data, dragging commodities and commodity-related assets along. Signs that the Fed is going to maintain its stimulating monetary policy are also good for riskier currencies. The Standard & Poor’s 500 Index rose 1.4 percent. The S&P/TSX Composite Index added as much as 1.6 percent.

The Bank of Canada will hold a monetary policy meeting next week. It’s expected to maintain the key overnight rate at 1 percent as it was doing since September 2010. Canada was the first among developed nations to raise its interest rates and some analysts say that it may raise the rates again. Others point out that Canada’s monetary policy is tied to that of the United States and the Fed isn’t going to raise its lending rates anytime soon.

USD/CAD slumped from 1.0037 to 0.9942 yesterday and stayed near that level today, while EUR/CAD traded at about 1.3113 as of 1:32 GMT today, following the drop from 1.3156 to 1.3109 yesterday. CAD/JPY jumped from 80.51 to 81.30 on the previous trading session and rose to 81.45 on today’s session.