BLBG: Canadian Dollar Strengthens, Trades Near Highest Since October
Canada’s currency strengthened as crude oil touched a six-month high, enhancing the appeal of commodity-linked currencies amid stronger appetite for higher- yielding assets.
“It’s a combination of factors,” including recommendations from investment banks, said Jonathan Gencher, Toronto-based director of currency sales at BMO Capital Markets. “There’s also more of that parity talk,” he said, referring to speculation the Canadian dollar will reach par with the U.S. greenback.
The Canadian currency climbed 1 percent to C$1.1119 per U.S. dollar at 11:14 a.m. in Toronto, from C$1.1231 yesterday. One Canadian dollar buys 89.93 U.S. cents. Canada’s dollar, known as the loonie, touched C$1.1099 yesterday, the strongest since Oct. 8.
“I might suggest going long the Canadian dollar,” Sophia Drossos, currency strategist at Morgan Stanley in New York, said in a Bloomberg Radio interview today. Going long is betting a currency or security will rise. “Canada is a very small, open economy. It’s very sensitive to trade flows, and if the global economy is doing better, Canada’s going to see the gains of that relatively quickly.”
The loonie and the dollars of New Zealand and Australia are among the top five performers this month among the most-traded currencies tracked by Bloomberg, rising 7.3 percent, 10.7 percent and 8.4 percent respectively against the U.S. dollar. The trio tends to rise and fall with commodity prices and stocks as risk proxies for global growth.
‘Rising Risk Appetite’
“It’s higher crude and generally a rebound in appetite for risk” that’s boosting commodity currencies, said Adam Cole, head of global currency strategy in London at RBC Capital Markets. “The sell-off in the U.S. dollar is largely a symptom of rising risk appetite.”
The U.S. dollar is the worst performing currency this month.
Crude for July delivery climbed for a fourth day, rising as much as 2.4 percent to $64.99 a barrel on the New York Mercantile Exchange, the highest since Nov. 10. Commodities including oil accounted for more than half of Canada’s export revenue last year.
TD Securities Inc. yesterday raised its forecast for the Canadian dollar, predicting it would reach par with the U.S. dollar by year-end.
