What’s Behind the Sell-Off in USD/CAD?

The biggest mover Wednesday morning is the Canadian dollar which has rallied close to 300 pips against the US dollar and is closing in on the 1.20 level. What’s behind the move?

1. Major merger and acquisition flow. Mexican breadmaker Bimbo closed on a $2.38 billion acquisition of U.S. Bread making unit of Canada’s George Weston Ltd

2. Oil prices are back above $40 a barrel and rising

3. OPEC Says Oil prices at $40-$50 is too cheap, prices need to be between $75 0 $100.

4. IMF says Oil May AVerage $50 a barrel this year and $60 a barrel next year

Comments

[Delojozafado:]

#2.. Oil prices are rising? They dropped off by a combined 5 US $s on Monday and Tuesday. Oil is down another.27 cents (US) today, down near $41. Nat Gas has hung steady this week in the $4.40 -$4.50/MM`BTU. These depressed prices continue to persist, despite bitter cold weather the last three weeks in the US heating markets and the time frame of when futures should start beginning to reflect the summer peak load A/C season. The US imports 15% of their Nat Gas from Canada.

The Loonie never the less continues to go much higher. It shot up strongly again today. There seems to be some forces stronger than can be explained by O&G prices at work here. It could be the Loonie strength is as related to a recovering market in the basic materials and "ags" as well as what so far seems to be just expectations O&G prices are rising or will rise.

A 2.4 billion injection of cash into Canada certainly does seem credible as a contributor. The Loonie is getting a lot stronger here the last week or so that is for sure. Something is going on that is not in my opinion fully explained by the authors short story. The question posed seems to have more context than the explanation. Is the Loonie tracking with the REAL, Rand and Aussie $ ? What are the issues vis a vis the two countries' central banks.

Jan 28 12:59 PM

[LightnRod:]

Cdn $ has been oversold, and it is due recovery. Cdn govt is fiscally responsible which is unlike all other national govts. Cda is facing some difficulties which is same as other nations, but IMHO, Cda is in better shape than all others, and has lots of upside. In addition, it has lots of natural resources which will be strong. The current down turn is with its manufacturing base that is tied with the US. However, it take some time for this to be shaken, but long term....not a bad bet.

Jan 28 08:04 PM

[je:]

LightnRod

I like the Canadian dollarbut I believe it will break to the down side of this consolidation pattern to the .63 / .65 area

If it does buy all you can buy.

Jan 29 09:01 AM

[spragus:]

The Loonie bounced higher the same day the Opposition leader announced his party would support the Government's Budget. Reduced political turmoil=stronger currency.

Jan 31 08:28 AM