Loonie Falls to More Reasonable Levels - National Bank Financial

The Canadian dollar has fallen to more “reasonable levels” after it surged more than 9% in May, according to Yanick Desnoyers, strategist at National Bank Financial.

The bank says lower commodity prices and a continued correction in oil should keep the Canadian dollar in check over the coming months. It predicts the loonie will trade between $.85 and $.90 based on an oil price outlook of around $60 a barrel. It was buying about $.86.6 in intraday trade on Monday.

“The appreciation registered in May seemed largely overblown,” Mr. Desnoyers said in a foreign exchange report. “The recent cooldown in the price of natural resources, including oil, should in principle keep the Canadian dollar in check over the coming months.”

He said the pullback in commodity prices was not surprising given the sharp rise early in the year, particularly given the International Energy Agency has cut its outlook for world energy demand growth through to 2013 to 7%.

The strategist said:

Canadian exporters can therefore heave a sigh of relief and should seize the opportunity to do some currency hedging for their international transactions before the eventual global recovery sets the Canadian dollar on a sustainable uptrend.

Comments

[Stephen Ros...:]

Loonie is more than an oil play. Minerals should continue a nice run boosting the C$. Canadian banking is strong. Technically Loonie is poised for a nice bounce. For a while, it looked like a head and shoulders pattern would emerge; with today's action jump, that's off the table. Nice start to MCD. I suspect we make new highs and get true "reasonable" valuation.

Jul 14 08:20 PM