The Canadian dollar closed little changed Tuesday amid concerns centred on global central banks.The loonie was well off early lows and closed up 0.01 of a cent at 98.15 cents (U.S.).
Concerns include the failure of Japan’s central bank to unveil more measures to boost that country’s economy and whether the U.S. Federal Reserve will start to taper off some of its bond purchases. There was also concern over a court challenge to the legality of the European Central Bank’s approach to the euro crisis.
The Bank of Japan started a big monetary stimulus earlier this year in an attempt to get the economy out of a two-decade stagnation. And there had been expectations it would announce new measures Tuesday to temper the rise in government bond yields by extending the duration on its ultralow interest rates to banks.
Instead, the bank’s policy board merely upgraded its economic assessment and the Japanese yen strengthened at least 1 per cent against all its 16 major peers.
Meanwhile, investors have been closely monitoring developments in the U.S. and whether the economic picture has improved enough for the Federal Reserve to reduce the amount of financial assets it buys in the markets – so-called tapering. Speculation that it will has eased somewhat after last week’s slightly better-than-expected U.S. jobs report for May.
The quantitative easing program, involving the purchase of $85-billion of bonds each month, has kept interest rates low and also helped fuel a strong rally on U.S. stock markets.
Traders also looked to the start of a two-day hearing by Germany’s constitutional court on the legality of a key European Central Bank program that has been credited with calming the 31/2-year-old euro debt crisis. The Federal Constitutional Court is considering arguments against the ECB’s offer to buy government bonds and lower borrowing costs for indebted countries.
Opponents of the bond-buying program say the program oversteps the ECB’s mandate, which forbids it from financing governments.
Commodity prices backed off Tuesday with July crude on the New York Mercantile Exchange down 39 cents to $95.38 a barrel.
July copper retreated for a fourth day, down 5 cents to $3.19 a pound. And August gold bullion dropped $9 to $1,377 an ounce.