Dollar and Yen Fall

The euro gave up recent gains after a German official said that EU finance ministers made “no decisions” regarding aid to Greece during the recent meeting of EU finance ministers. The Japanese yen and the US dollar fell after the Bank of Japan doubled its loan program designed to fight deflation and the Federal Reserve said it will keep interest rates at record lows. Demand for high yielding assets and currencies rose benefitting the Kiwi dollar, the Canadian dollar and the S African Rand. The Canadian dollar rose to its highest level vs. the greenback since 2008. Andrew Wilkinson of Interactive Brokers Group stated, “Everything is doing OK against the dollar and the yen except the euro. Greece just won’t go away, and that doesn’t sit well with the market.”

Greek Worries Persistent

German government spokesman Ulrich Wilhelm said in Berlin that no decisions on Greek aid are likely to be made at the upcoming EU summit. Public opposition to any aid for Greece is widespread in Germany and politically unpopular. Boris Schlossberg of GFT Forex said, “The Germans have been the primary sticking point in creating a pan-European solution. Any resistance casts doubt on solving the Greece problem and helps push the euro lower.”  Twenty years ago Harvard University Professor Martin Feldstein said that the euro would be an “economic liability” and warned that Greece’s austerity measures will fail and that Greece may leave the euro zone to solve its massive debt crisis. Feldstein stated, “The idea that Greece can go from a 12 percent deficit now to a 3 percent deficit two years from now seems fantasy.” Recently Feldstein warned that Greece’s problems may spread to other EU nations.

Loonie On Track For Parity With Greenback

Canada’s dollar hit a twenty month high vs. the US dollar as oil prices rose pushing the loonie higher in currency markets. Oil is Canada’s largest export. The loonie started its rise after the Bank of Canada said on March 2nd that Canadian economic output and inflation were higher than forecast prompting speculation that the Bank of Canada would raise rates. Christian Dupont of Desjardins Group in Montreal stated, “The Fed pledge for lower rates combined with the view that the Bank of Canada might raise rates sooner than originally thought is giving legs to the Canadian dollar” He also said that he expects parity with the US dollar. Rising commodity prices combined with a rise in risk appetite have pushed commodity linked currencies higher.

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