Canadian dollar rallies as market rethinks Fed taper risk

Economy

Canadian dollar rallies as market rethinks Fed taper risk

Published

3 years ago

May 20, 2021

The Canadian dollar strengthened against its U.S. counterpart on Thursday as the greenback broadly declined and the Bank of Canada fretted about imbalances in the country’s red-hot housing market.

The loonie, which has benefited from surging commodity prices in recent months, was trading 0.7% higher at 1.2052 to the greenback, or 82.97 U.S. cents, moving back in reach of Wednesday’s three-year high at 1.2013.

The U.S. dollar lost ground against a basket of major currencies, hovering just above a multi-month low. On Wednesday, it had rallied after several U.S. Federal Reserve policymakers, in minutes to the Fed’s most recent monetary policy meeting, said a discussion about reducing the pace of asset purchases would be appropriate “at some point.”

“The FX market appeared to have overreacted to the taper hint, as policy is unlikely to change until the Fed see months more data, and until substantial further economic progress is made,” said Ronald Simpson, managing director, global currency analysis at Action Economics.

In contrast, the Bank of Canada last month cut the pace of its bond purchases, becoming the first major central bank to cut back on pandemic-era money-printing stimulus programs.

On Thursday, the BoC said Canada‘s housing market and high household debt levels had left the economy more vulnerable to economic shocks, but made clear it would not raise interest rates to cool the frenzy.

Canada added 351,300 jobs in April, the third straight month of increases, a report from payroll services provider ADP showed.

The price of oil, one of Canada‘s major exports, settled 2.1% lower at $62.05 a barrel, after diplomats said progress was made toward a deal to lift sanctions on Iran.

Canadian government bond yields eased across a flatter curve in tandem with U.S. Treasuries. The 10-year was down 3.3 basis points at 1.545%.

(Reporting by Fergal Smith; editing by Jonathan Oatis)

Economy

Nigeria’s Economy, Once Africa’s Biggest, Slips to Fourth Place – BNN Bloomberg

Published

6 mins ago

April 18, 2024

Harry Miller

(Bloomberg) — Nigeria’s economy, which ranked as Africa’s largest in 2022, is set to slip to fourth place this year and Egypt, which held the top position in 2023, is projected to fall to second behind South Africa after a series of currency devaluations, International Monetary Fund forecasts show.

The IMF’s World Economic Outlook estimates Nigeria’s gross domestic product at $253 billion based on current prices this year, lagging energy-rich Algeria at $267 billion, Egypt at $348 billion and South Africa at $373 billion.

Africa’s most industrialized nation will remain the continent’s largest economy until Egypt reclaims the mantle in 2027, while Nigeria is expected to remain in fourth place for years to come, the data released this week shows.

Nigeria and Egypt’s fortunes have dimmed as they deal with high inflation and a plunge in their currencies.

Bola Tinubu has announced significant policy reforms since he became Nigeria’s president at the end of May 2023, including allowing the currency to float more freely, scrapping costly energy and gasoline subsidies and taking steps to address dollar shortages. Despite a recent rebound, the naira is still 50% weaker against the greenback than what it was prior to him taking office after two currency devaluations.

Read More: Why Nigeria’s Currency Rebounded and What It Means: QuickTake

Egypt, one of the emerging world’s most-indebted countries and the IMF’s second-biggest borrower after Argentina, has also allowed its currency to float, triggering an almost 40% plunge in the pound’s value against the dollar last month to attract investment.

The IMF had been calling for a flexible currency regime for many months and the multilateral lender rewarded Egypt’s government by almost tripling the size of a loan program first approved in 2022 to $8 billion. This was a catalyst for a further influx of around $14 billion in financial support from the European Union and the World Bank.

Read More: Egypt Avoided an Economic Meltdown. What Next?: QuickTake

Unlike Nigeria’s naira and Egypt’s pound, the value of South Africa’s rand has long been set in the financial markets and it has lost about 4% of its value against the dollar this year. Its economy is expected to benefit from improvements to its energy supply and plans to tackle logistic bottlenecks.

Algeria, an OPEC+ member has been benefiting from high oil and gas prices caused first by Russia’s invasion of Ukraine and now tensions in the Middle East. It stepped in to ease some of Europe’s gas woes after Russia curtailed supplies amid its war in Ukraine.

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Economy

Limiting Global Warming to 1.5C Would Avoid Two-Thirds of Economic Toll – Bloomberg

Published

5 hours ago

April 18, 2024

Harry Miller

Climate inaction will depress the world’s economy more than previously estimated, according to a new study that takes into account the impacts of weather extremes and variability such as temperature spikes and intense rainfall.

A scenario in which global temperatures rise 3C on average will reduce the world’s gross domestic product by about 10%, doctoral researcher Paul Waidelich of ETH Zurich and colleagues write, with less developed countries paying the worst toll. By comparison, limiting global warming by 2050 to 1.5C — as sought by the Paris Agreement — will reduce that impact by about two-thirds.

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