Canadian Dollar Hits New 30 Year High, New Zealand Dollar Advances to New 22 Year High (page 2 of 2)

The Dow Jones Industrial Average is now 50 points shy of hitting 14,000. Based upon last week's monetary policy meeting, the Bank of Japan is in no rush to raise interest rates.

As long as this stance is confirmed by the release of their minutes from the meeting held between June 14 and 15, the market will not be worried that an interest rate hike by the Japanese will be what puts an end to the carry trade. Instead, another major headline about the problems in the sub-prime sector exacerbating could be the catalyst for a sharp increase in risk aversion.

Canadian Dollar Hits New 30 Year High, New Zealand Dollar Advances to New 22 Year High

Oil prices continue to be the driver of strength in the Canadian dollar. The currency pair advanced to the highest level in 30 years as oil prices traded back up towards its 11 month highs. This could keep the central bank hawkish, but eventually they will need to back off.

The manufacturing sector is beginning to suffer from the strength of the Canadian dollar. For the second month in a row, manufacturing shipments dropped. New motor vehicle sales also fell 0.8 per cent in May. Part of the rally in the currency has also been fuelled by merger and acquisition flow.

Another deal was announced, but the higher the Loonie rises, the more expensive Canadian companies will become.

Meanwhile the New Zealand dollar also performed extraordinarily well today. The currency hit a new 22 year high after reporting stronger than expected consumer prices in Q2. The combination of last week's upside surprise in retail sales and today's higher inflation numbers suggests that we could see another rate hike from the Reserve Bank of New Zealand in the near future.