The impact of the situation in Iraq was felt on the currency markets throughout the week. Developments over the weekend and into the start of the week were exacerbated on Wednesday when government personnel in Baghdad called for the US to target jihadist militants with air strikes. As a result we saw a general risk-off in the market, with traders selling off stocks and looking to buy into safe-haven assets such as the Japanese yen, which made up ground on Wednesday into yesterday. The news also raised concerns about oil supply over coming months, given that Iraq is a major producer. This pushed up the price of Brent crude – good news for the Canadian dollar, with oil being a significant export commodity for them. As a result, the Canadian currency yesterday pushed up to 5 and a half month-highs against its most-traded counterpart, the US dollar. Retail sales and inflation data released today could provide further support for the Canadian dollar.
Yesterday also saw the Norwegian krone lose out significantly. The currency tumbled a per cent and a half following an announcement from the central bank that the widely-forecasted interest rate hike would not happen until at least 2016. This sentiment was not expected, and bankers now warn that the door is open for an interest rate cut at the next decision.
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