Canadian Dollar Sep '22 (D6U22)
|Tick Size||0.00005 points ($5.00 per contract)|
|Contract Size||CAD 100,000|
|Trading Hours||5:00p.m. - 4:00p.m. (Sun-Fri) (Settles 2:00p.m.) CST|
|Value of One Futures Unit||$100,000|
|Value of One Options Unit||$100,000|
|Last Trading Day||First business day preceding third Wednesday of expiring month|
A "currency" rate involves the price of the base currency (e.g., the dollar) quoted in terms of another currency (e.g., the yen), or in terms of a basket of currencies (e.g., the dollar index). The world's major currencies have traded in a floating exchange rate regime ever since the Bretton-Woods international payments system broke down in 1971 when President Nixon broke the dollar's peg to gold. The two key factors affecting a currency's value are central bank monetary policy and the trade balance. An easy monetary policy (low interest rates) is bearish for a currency because the central bank is aggressively pumping new currency reserves into the marketplace and because foreign investors are not attracted to the low interest rate returns available in the country. By contrast, a tight monetary policy (high interest rates) is bullish for a currency because of the tight supply of new currency reserves and attractive interest rate returns for foreign investors.
The other key factor driving currency values is the nation's current account balance. A current account surplus is bullish for a currency due to the net inflow of the currency, while a current account deficit is bearish for a currency due to the net outflow of the currency. Currency values are also affected by economic growth and investment opportunities in the country. A country with a strong economy and lucrative investment opportunities will typically have a strong currency because global companies and investors want to buy into that country's investment opportunities. Futures on major currencies and on cross-currency rates are traded primarily at the CME Group.
Dollar - The dollar index (Barchart.com symbol DXY00) tumbled to a 3-3/4 year low in January 2021. Signs that the Fed would continue with its QE program weighed on the dollar in early 2021 after the minutes of the Dec 15-16 FOMC meeting released in early January showed "all FOMC participants" favored maintaining the current pace of Fed asset purchases. The dollar stabilized and pushed higher into March when T-note yields rose on the prospects for the U.S. economy to recover from the pandemic. T-note yields moved higher as inflation expectations surged to an 8-year high in March when U.S. lawmakers pushed to boost pandemic stimulus programs. The dollar then fell back into May and tested its 3-3/4 year low from January after the Fed said recent price spikes were only temporary and inflation expectations were "extremely well-anchored." However, the dollar then trended higher on increased safe-haven demand as concerns rose that the new Covid delta strain could threaten the global economic recovery. Also, rising price pressures in the U.S. prompted a more hawkish Fed after U.S. consumer prices surged at the fastest pace in four decades. In November, the dollar index posted a 1-1/2 year high as divergent central bank policies weighed on G-10 currencies. USD/JPY rose to a 5-year high, and EUR/USD fell to a 1-1/2 year low. The dollar remained firm into year-end after the FOMC at the December 14-15 policy meeting doubled its pace of QE tapering and raised its rate-hike forecast for 2022 and 2023. The dollar index finished 2021 up +6.4% yr/yr at 95.670.
Euro - EUR/USD (Barchart.com symbol ^EURUSD) began 2021 on solid footing and posted a 3-1/2 year high in January. Dollar weakness in early 2021 benefitted EUR/USD as U.S. political uncertainty weighed on the dollar with runoff elections in Georgia that would decide if Democrats would control the Senate and House. EUR/USD fell back into March after the ECB pledged to "significantly" boost the pace of its pandemic bond-buying program (PEPP). EUR/USD climbed into May after signs of rising inflation pushed the 10-year German bund yield up to a 2-1/2 year high. However, EUR/USD trended lower and posted a 1-1/2 year low in November. Bund yields retreated, and the EUR/USD weakened, as the omicron Covid variant undercut economic growth in the Eurozone. Also, ECB President Lagarde said in November that an ECB interest rate hike in 2022 is "very unlikely." The ECB in December temporarily boosted its bond purchases in PEPP until March of 2022 on growth concerns after it cut its Eurozone 2021 and 2022 GDP estimates. EUR/USD finished 2021 down -6.9% yr/yr at 1.13682.
Yen - USD/JPY (Barchart.com symbol ^USDJPY) opened 2021 on a weak note and posted a 2-year low of 102.59 in January. The yen found support in January when the dollar index tumbled to a 3-3/4 year low on U.S. political concerns. USD/JPY then pushed higher as a jump in T-note yields undercut the yen when the 10-year T-note yield rose to a 1-year high in March. USD/JPY traded sideways to higher during the rest of 2021 as signs of divergent central bank policies weighed on the yen. BOJ Governor Kuroda said that the BOJ "would persistently continue with powerful easing," while rising inflation pressures in the U.S. prompted the Fed to accelerate its space of QE tapering. USD/JPY in November climbed to a 5-year high of 115.51 as the yen weakened after a surge in Covid cases forced the Japanese government to tighten pandemic restrictions that undercut Japanese economic growth. USD/JPY finished 2021 up +11.6% at 115.11.
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