CAD Outstrips Other Currencies Because of Surging Canada Bond Yield

The most concerned US Nonfarm Payrolls showed only 194K new added jobs, worse than the previous value, according to the job figures released by the US and Canada respectively last Friday. At the same time, investors are worried about whether the CAD that surged due to the rocketing oil price will be stronger as the employment persons and unemployment rate figures by Canada perform well, when the US economy grows slowly.

Lets go back to the US employment figures. Although the nonfarm payrolls is worse than expectation, the average hourly earnings and unemployment rate are better than expectation and previous value,

curbing an overall decline of USD, which is at the same time supported by the US 10-year treasury yield that keeps rising. So the USD falls against the CAD, but climbs further against the JPY.

CAD outperforms all other currencies in the forex market. Last Thursday saw a strong Canada‘s Ivey PMI in September, indicating that the country’s economy grows rapidly. It is obvious that the recently rocketing energy price is pretty conducive to the major energy exporter, Canada, being the world‘s fourth-largest oil producer, followed by the US, Russia and Saudi Arabia. The energy prices are expected to have a better performance in the future, bolstering traders’ confidence in buying more Canada dollars.

There has another favorable factor for CAD, a soaring Canada‘s 10-year bond yield. Last Friday saw a bond yield report of 1.629%, higher than the US’s 1.618%, outstripping the US once more since last April. In addition, the bond spreads widen between Canada and other countries. Thus, with a sharp rise in bond yield of the US and Canada, the extending bond spreads between the two countries and Japan heap more pressure on the JPY.

The 10-year bond yields of Germany, Netherlands and Switzerland are negative, lower than the Japan, reflecting weak European currencies. In a word, the recent forex market has witnessed the strongest CAD and weakest EUR and JPY. Therefore, please think carefully before trading the two cross currency pairs, EUR/CAD and CAD/JPY.