Canadian dollar hits 13month high after Fed unveils stimulus plans

[np_storybar title=”Why Bernanke’s QE3 announcement is the real deal” link=”https://business.financialpost.com/2012/09/13/why-bernankes-qe3-announcement/”%5DAnalysis: The most important part of the announcement was that all of this is open-ended, meaning the Fed is committed to the new round of quantitative easing for as long as it takes [/np_storybar]Canada’s dollar strengthened to a 13-month high versus its U.S. counterpart after the Federal Reserve announced a third round of stimulus measures to spur economic growth in the nation’s largest trading partner.The currency gained against 13 its 16 most-traded counterparts as the Fed said it will expand its holdings of long-term securities with open-ended purchases of US$40-billion of mortgage debt a month, expanded its guidance on interest rates into 2015 and pledged to keep monetary policy accommodative even when the economy strengthens. The debt purchases raised concern that the money added to the U.S. economy will erode the value of the greenback.“Number one, they are going to purchase more securities, and those purchases have been flagged as open ended for the time being — markets are going to look at that as a positive for risk,” George Davis, chief technical analyst for fixed income and currency strategy in Toronto at Royal Bank of Canada said in a telephone interview. “More risk means currencies like Canada’s, which is closely tied to commodities, will benefit.”Canada’s currency rose 0.8% to 96.82 cents per U.S. dollar at 4:20 p.m. in Toronto, the strongest since August 2011. One Canadian dollar buys $1.03284.[np-related]Government bonds rose. The benchmark 10-year yield fell two basis points, or 0.02 percentage point, to 1.88%. Two- year note yields dropped two basis points to 1.17 percent.U.S. stocks rose, sending the Standard & Poor’s 500 Index above its highest close in five years. The S&P 500 gained 1.6%.Commodities RallyCommodity-linked currencies were bolstered as investors placed bullish bets on growth. The dollars of Australia and South Africa, commodities exporters like Canada, both gained against the greenback. The Aussie appreciated 0.7% to $1.0540 and the kiwi, as New Zealand’s dollar is known, rose 1.2% to 83.05 U.S. cents.Gold and oil, both Canadian exports, climbed rose. The metal rose to the highest level in more than six months as gold futures for December delivery rose 2.2% to settle at $1769.70 on the Comex in New York, the highest since Feb. 29. Crude futures advanced the most since May, rising 1 percent to $98.01 a barrel in New York.“The longer that the U.S. keeps their interest rates low, especially since commodities are priced in U.S. dollars, the longer we’ll see a rally in commodities and commodity-based currencies,” Tim Gardiner, managing director of commodities at Toronto-Dominion Securities, said in a phone interview.Bloomberg.com read more

US homebuilder confidence hits highest level since 2005

US homebuilder confidence hits highest level since 2005 U.S. homebuilders’ confidence soared this month to the highest level in 11 years, reflecting heightened expectations of better sales now and well into 2017.The National Association of Home Builders/Wells Fargo builder sentiment index released Thursday jumped seven points to 70. The last time the reading was at this level was July 2005, during the high-flying days of the last U.S. housing boom.Readings above 50 indicate more builders view sales conditions as good rather than poor. The index has been above 60 the past four months after hovering in the high 50s much of this year.Builders’ view of sales now and over the next six months rose sharply, as did a gauge of traffic by prospective buyers.The sharp increase in the latest builder survey is consistent with recent gains for the stock market and improving U.S. consumer confidence, said Robert Dietz, the NAHB’s chief economist.“Though this significant increase in builder confidence could be considered an outlier, the fact remains that the economic fundamentals continue to look good for housing,” Dietz said. “At the same time, builders remain sensitive to rising mortgage rates and continue to deal with shortages of lots and labour.”A stable job market and low mortgage rates have helped spur demand for new homes this year. Sales of new U.S. homes hit a seasonally adjusted annual rate of 563,000 units in October. Sales data for November are due out next week.Through the first 10 months of this year, sales of new homes are 12.7 per cent higher than in the same stretch last year. The strong demand has helped lift prices, pushing the median sales price of new U.S. homes to $304,500 as of October.This month’s builder index was based on 318 respondents.A measure of current sales conditions for single-family homes jumped seven points to 76, while a gauge of traffic by prospective buyers climbed six points to 53. Builders’ view of sales over the next six months rose nine points to 78.Despite builders’ bullish sales outlook, the recent steady rise in mortgage rates could make homes less affordable for some would-be homebuyers, possibly dampening sales.Long-term mortgage rates have risen steadily in the weeks since Donald Trump’s victory in November to become the country’s next president.Mortgage giant Freddie Mac said Thursday the average rate on a 30-year fixed rate loan jumped this week to 4.16 per cent from 4.13 per cent the previous week. The benchmark rate surpassed its 3.97 per cent level of a year ago.Investors expect the budget deficit to increase under Trump, prompting the interest rate increase.The possibility of a continued uptick in mortgage rates is one reason why the National Association of Realtors expects U.S. home sales to rise only modestly next year. by Alex Veiga, The Associated Press Posted Dec 15, 2016 8:02 am MDT Last Updated Dec 15, 2016 at 9:36 am MDT AddThis Sharing ButtonsShare to TwitterTwitterShare to FacebookFacebookShare to RedditRedditShare to 電子郵件Email read more