Money in Motion

Under-the-Radar Issues That are About to Move Currencies

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If you can glance away from the mess in Europe, you'll notice some currency-moving issues starting to simmer.

Is it just me, or is everyone getting a little seasick watching the currency markets bounce from one headline to the next?

"What we've done all year is move from one side of the ship to the other, all together," says Camilla Sutton, chief currency strategist for Scotia Capital. If Europe settles down, "I suspect we will sway back toward the U.S. in coming months," she told me.

Sutton believes a series of under-the-radar issues are about to play bigger parts in the currency markets, and many of them - a potential new round of quantitative easing, the deficit-cutting supercommittee's likely difficulties, loose monetary policy, and rising inflation around the world - are likely to hurt the dollar. Meanwhile, the recent series of cuts in sovereign debt ratings are helping the Canadian dollar, since there are "fewer and fewer triple-A sovereigns with a developed bond market," she says. And of course, if risk aversion eases, that will also help commodity-linked currencies. 

"Particularly as things like the supercommittee struggle heading into year end, I continue to think the U.S. dollar is likely to move lower, " Sutton told me, and "the Australian dollar and the Canadian dollar should do fairly well in the coming months."

Time to get busy - away from Europe.

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