NEWS / Foreign Exchange

White water ahead?

• Though the Federal Reserve kept its policy rate unchanged in March, it dropped mention of a tightening bias from its statement and left no formal guidance on its future direction. This shift, in combination with Washington??™s turn to a more protectionist attitude toward non-market economies, is likely to make the exchange market more volatile.
• The yen appreciated strongly against many currencies from late February through mid-March, mainly because of reversals of carry-trade positions. In our view this is only the beginning. We expect to see the yen at 110-112 against the U.S. dollar by this summer.
• The Canadian dollar gained lift from higher-than-expected inflation and a marked rise in the price of oil, rising more than 1.5 cents against the U.S. dollar last month. Though we think the coming economic indicators will be fairly weak, we expect the loonie to remain strong in the months ahead.