Forex Blog: Currency Trading News & Analysis.

October 5th 2006

Canadian Dollar to remain range-bound?

Seasoned forex traders turn to one place when they want to know how other traders believe a given currency will perform in the near-term: futures prices. There are only a few components to futures prices, namely underlying price, time to maturity, and volatility. The first two factors are usually given, which means ‘implied volatility’ can easily be calculated, providing a proxy for how the markets expect a currency to perform over the life of the futures contract. Currently, volatility in Canadian Dollar futures is virtually zero, which means despite the Loonie’s lofty valuation, the markets expect it to remain range-bound for the time being. The Globe and Mail reports:

Volatility is never far away from the currency markets. Canada could see elections in Ottawa and in some provinces within a year, and the outlook for the U.S. economy remains uncertain.

Read More: Calm currency markets? Time for hedging on the cheap

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Posted by Adam Kritzer | in Canadian Dollar, Investing & Trading | No Comments »

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