NEW YORK --U.S. stocks were set to rise sharply Monday and oil prices fell after news that al Qaeda leader Osama bin Laden, the man who masterminded the largest terrorist attack in American history, was killed Sunday.
Investors' appetite for risk showed signs of returning Monday, in reaction to the announcement that al Qaeda frontman Osama bin Laden has been killed in a shootout with U.S. special forces in Pakistan.
France's President Nicolas Sarkozy hailed the killing as a coup in the fight against terrorism, but both he and Foreign Minister Alain Juppe warned it did not spell al Qaeda's demise.
British Prime Minster David Cameron also said the West would have to be "particularly vigilant" in the weeks ahead.
Across Asia, where trading is thin amid a week of holidays throughout the region, Japan's Nikkei 225 was up 1.6 per cent to its highest closing since the country's devastating earthquake and tsunami on March 11. And in Seoul, South Korea's Kospi index rose 1.7 per cent to close at a new record high.
Stock markets in Hong Kong, Shanghai, Taiwan, Thailand, Malaysia and Singapore are all closed for international Labour Day Monday, as is Britain's FTSE 100.
Longer term, however, analysts said the news would have only a limited impact on the dollar because interest rates, not geopolitical events, are the overriding driver.
"Risk as a driver of the FX market has been much less than it has been ... The main trend is relative dollar weakness due to monetary policy," said Kasper Kirkegaard, currency strategist at Danske Bank in Copenhagen.
Speaking of the Canadian dollar, it seems that recent strength in the loonie has not been enough to keep inflation at bay. Sheryl King, economist at Bank of America Merrill Lynch Canada says the Bank of Canada should be raising rates to head off inflation but that uncertainty over the end of QE2 and the U.S. debt mess will prevent that Bank of Canada from raising rates until October. Sheryl sits down with us at 10:05.
Oddly, U.S. dollar strength does not mean Canadian dollar weakness, at least on this occasion," Kane explained.
"This perceived lowering of the threat of terrorism means investors have more of an appetite for risk, and the Canadian dollar is still regarded as a risk play.
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