Canadian Dollar gets hit by the rapid jump of the USD index

Today's expected range for the Canadian Dollar against the major currencies:

US Dollar         1.2600-1.2700

Euro                 1.5300-1.5400

Sterling            1.7600-1.7700

The US Dollar Index is much higher this morning as markets react to a jump in US Treasury yields with the 10-year Treasury Bond hitting a new recent high yesterday of 1.6%. With the jump in the Dollar many so called riskier assets and currencies were sold off by quite a bit overnight as investors worry that those countries would need to end their economic recovery packages early to fight growing inflation. The Canadian Dollar was one of those currencies that was hit especially hard and once again shows just how vulnerable the Loonie is at the moment.

The Canadian Dollar has had a wild ride over the last 24 hours as it opened the day yesterday at the 1.2500 (0.8000) level and actually traded below that level for a few hours. this morning USD.CAD opens the market at the 1.2650 (0.7905) level which is over 150 points higher than its best levels of yesterday and quite a significant move. Canada would be one of the countries that investors feel would be negatively affected by high interest rates going forward as our deficit size has grown so big. The Bank of Canada has stated that they will allow inflation to jump in the short term before ending their stimulus program but markets appear to be ignoring those comments for the moment.

With just secondary data on tap for both Canada and the US this morning markets will be focusing on interest rates moving higher due to a growth in US interest rates, stocks had a tough day yesterday and they look set to fall again today which will put more pressure on the US Dollar to jump higher in the short-term. Look for USD.CAD to settle in and trade in the 1.2600 to 1.2700 range for the day.