A Three Dollar Tale (and some other currencies)
Interesting day in the markets today. If you follow the markets enough to read CAPS blogs, you certainly know the broad US market, as measured by the S&P 500 index, had a rip-roaring day. Up 1.67% to be precise.
What you may have missed are the moves in a couple of currencies versus the US dollar.
Aussie dollar: up 1.6% against the US$
Canadian dollar: up 1% against the US$
Swedish krona: up 1.2% against the US$
Norwegian kroner: up 1.3% against the US$
the euro, Japanese yen and Swiss franc, each up just under 1% against the US$.
I'm pretty sure it's very unusual to see one-day currency swings this big, especially across established currencies. Also worth noting that most of the cross-currency trades, e.g. Canadian dollar vs. euro, didn't move much.
Not sure what hammered the dollar across the board today, maybe Egypt looked a little more stable? But that wouldn't explain the Aussie being up so much more than most of the other currencies. The Reserve Bank of Australia did issue a statment indicating no change in rate policy recently, but that was widely expected so shouldn't have moved the market.
Bottom line - it was a great day in the US stock market, but only if you owned stocks in US dollar terms. An Australian investor holding US stocks basically broke even today; Canadian and European investors holding US stocks did a little better than their friends down under, but still didn't have the big day US dollar denominated investors had.
I thought it was interesting that on one of the best days for the US stock market in quite some time, an account holding US stocks denominated in the Aussie $ would have struggled to break even. Not sure what to make of the one-day move and have no clue if it's a blip or a longer term trend emerging.
Anyone with thoughts on why there was such a big move today or what it means for our portfolios is certainly welcome to chime in.
Disclosure: Long the Aussie $ via the FXA etf.