CAD/JPY: Catching Up to the Hype

There have been a few major situation changing developments over the past couple weeks that has had a profound impact on currency perceptions across the globe.  First of all is the Federal Reserve tapering the final $15 billion from their Quantitative Easing program along with the ever increasing sustainability of the US labor market.  Then came the wave of central banks running in the diametrically opposed direction of the Fed; the Reserve Bank of New Zealand removed their hawkish bias to become more neutral, the Bank of Japan surprisingly added to their QE program in addition to making changes to the General Pension Investment Fund, and the European Central Bank unanimously mentioned that they would soon begin purchasing asset-backed securities.  The USD has been the biggest benefactor of these policy directions, but USD strength seems to be running out of steam.

Another currency that is closely related to the USD is the CAD which not only shares the same continent with the US, but just put up very good labor market data that is even more emphatic than that of their larger cousin.  Before today though, hype in the CAD has been much less fervent, but could be doing a little catch up as we head in to a new week.  For instance, the USD/JPY has risen nearly 600 pips since the end of last week when the BoJ made their balance sheet pronouncements, but the CAD/JPY has only risen 400.  For a set of currency pairs that typically see a similar amount of movement on a daily basis, this is quite a gap between them.

So while the USD/JPY may find it difficult to find even more buyers among the many whom have already bought it, the CAD/JPY just might get a few more fans as it appears the Canadian economy could be shadowing that of the US.

Figure 1: