More pain could be in store for the loonie, the Australian dollar, and Norwegian krone. These currencies, which surged as investors sought highly liquid investments that corresponded with demand for global resources such as copper and oil, have been among the most vulnerable as commodities have corrected.
One U.S. dollar bought as many as 1.0656 Canadian dollars on Tuesday USDCAD
-0.11% , the highest in just over a
year, before the Canadian unit rebounded a bit Wednesday to trade at $1 per 1.0408 Canadian dollars.
One U.S. dollar bought as many as 1.0656 Canadian dollars on Tuesday USDCAD
-0.11% , the highest in just over a
year, before the Canadian unit rebounded a bit Wednesday to trade at $1 per 1.0408 Canadian dollars.
“Canada is still perceived as a global commodities play,” said Francis Campeau, broker at MF Global in Montreal. “As foreigners liquidate equities, they also need to liquidate the underlying currency.”
Analysts anticipate the Canadian dollar will continue falling. Kathy Lien, director of currency research at GFT Forex, is predicting the U.S. dollar could rise as high as 1.10 Canadian dollars, or another 3% from this week’s highs, as a sluggish economic growth curbs demand for commodities and related assets. Read more on Europe recession fears.
The Canadian dollar closely tracks the movements of oil prices, which just finished their worst quarter since the financial crisis. Crude-oil futures ended Tuesday’s session under $76 for the first time since September 2010, before recovering to close above $79 on Wednesday. Read more on oil.
An extended recovery in investor sentiment about the economy, which helped U.S. stocks rally for two straight sessions this week, could provide a floor for the Canadian dollar.
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