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    Asian Session – Loonie down on Conservative election defeat; Aussie up on RBA minutes

    Canada’s Liberal party won the elections on Monday, gaining a majority in parliament and toppling Stephen Harper’s Conservative government. Liberal leader Justin Trudeau set a record on the most seats gained from one election to the next, as the Liberals had come third in the previous election. Market reaction was not as positive with investors concerned about the party’s pledge to run a C$10 billion deficit for three years to spend on infrastructure to boost the economy. Trudeau also plans to raise taxes on high-income earners and lower them for middle-income earners.

    The Canadian dollar fell against the US dollar after the election results on uncertainty about the new government’s economic policies. The US dollar gained over 1.5% against the loonie to climb from around 1.2860 yesterday to a high of 1.3046 in today’s Asian session. It has since eased slightly to 1.3017.

    The Australian dollar firmed after the release of the Reserve Bank of Australia’s minutes from its latest monetary policy meeting. The RBA expressed concern about the risks to financial stability from the developments in Australia’s booming property market. This lowered expectations that the RBA will cut rates again soon, despite on-going downside risks from China.

    The aussie climbed to 0.7282 in late Asian session to recover most of yesterday’s losses when it hit a low of 0.7238 against the US dollar.

    The euro fell to a near 10-day low on Monday and made only a modest recovery in today’s Asian trading. The single currency is being weighed down by expectations that the European Central Bank will signal further monetary easing in the form of QE expansion or extension when it meets on Thursday for its latest policy meeting.

    The euro was trading at 1.1326 against the dollar in late Asian session and at 135.31 against the yen. The pound was off yesterday’s highs against the dollar but above session lows to trade at 1.5479. Meanwhile, the dollar was steady against the yen at 119.48 yen.

    Oil prices rose slightly on Tuesday after tumbling around 3% yesterday. However, worries about oversupply and increased production from Iran limited any gains. WTI oil futures were up 0.3% at $46.03 in late Asian trading.

    It will be another relatively quiet day today as the only major data will come in the form of US housing starts and building permits. Attention will now shift to the ECB and Bank of Canada policy decisions later this week.

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