The Canadian dollar is attempting to rally, and revisit levels last seen a week ago. It is not alone. All the G-10 major currencies have recorded gains against the U.S. dollar overnight, albeit in thin, year-end markets. USD/CAD fell from 1.2825 in Asia to $1.2773 in early Toronto trading today, in part due to equity portfolio managers rebalancing positions for month-end. The nearly 3.0% rise in the S&P 500 index in December suggests portfolio managers need to buy Canadian dollars to bring hedges in-line with their mandates. The Australian dollar and British pound are purchased for the same reason.
The December surge in new COVID-19 cases in Ontario, the U.S., the U.K., and Europe, forced authorities to enact sweeping restrictions to combat the spread and prevent patients from overwhelming emergency rooms.
Elsewhere, the U.K. approval of the AstraZeneca vaccine, combined with the new Brexit agreement, and ongoing hopes for a new U.S. COVID-19 Relief stimulus package, improved global risk sentiment and undermined the U.S. dollar in the process. Asia equity indexes closed on a mixed note. European bourses have given up early gains and are close to flat, while U.S. futures are still in the green.
GBP/USD climbed from $1.3500 in Asia to $1.3614 in early New York trading, before easing down to $1.3580. Month-end portfolio rebalancing gave GBP/USD and added lift.
EUR/USD rallied with an improved tone to risk sentiment. The short-term technicals are bullish above $1.2170, with the break above $1.2270 suggesting further gains to $1.2500.
There are not any economic reports on tap today.
Rahim Madhavji is the President of KnightsbridgeFX.com, a Canadian currency exchange that provides better rates than the banks to Canadians