The Canadian Dollar Stable, Russia Faces Penalties

On Tuesday, investors considered the economic implications of Russia-Ukraine hostilities, and the price of oil, one of Canada’s main exports, gave up some of its earlier gains. After trading between 1.2719 and 1.2782, the loonie remained practically flat at 1.2750 to the US dollar or 78.43 cents. “The Canadian dollar has been primarily at the mercy of oil markets today,” said Simon Harvey, Monex Europe and Monex Canada’s head of FX analysis.

After Moscow deployed soldiers into two separatist regions in eastern Ukraine, oil rose to its highest level since 2014 at $96 a barrel, but settled considerably below that level at $92.35 a barrel, up 1.4% on the day. Speculators have reduced their bullish wagers on the Canadian dollar, according to data released on Friday by the US Commodity Futures Trading Commission.  US President Joe Biden issued its first wave of penalties on Russia after it initiated an invasion on Ukraine. During this time Wall Street pared losses.

Meanwhile, the US Trade Representative’s office expressed opposition to Canada’s intention to establish a digital services tax and asked the country to abandon its plans. Following Monday’s trading vacation, Canadian government bond rates were higher throughout the curve. The 10-year yield increased 4 basis points to 1.916%, closing near on the three-year high of 1.995% set last Wednesday.

Outlook on Currencies

In Asia on Wednesday morning, the dollar was higher. Investors are trying to figure out what’s going on in Ukraine. By 11:32 p.m. ET, the US Dollar Index, which measures the greenback against a basket of other currencies, rose 0.04% to 96.050.

The USD/JPY exchange rate fell 0.05% to 115.02. The AUD/USD exchange rate rose 0.07% to 0.7224. After the Reserve Bank of New Zealand lifted interest rates for the third time in a row, the NZD/USD pair rose 0.50% to 0.6764. The bank also hinted that more tightening may be necessary to keep inflation in check. The USD/CNY exchange rate rose 0.01% to 6.3269, while the GBP/USD exchange rate rose 0.09% to 1.3594.

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