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15 May 2014
CAD, still offering value? – Rabobank
FXStreet (Guatemala) - Jane Foley, Senior Currency Strategist at Rabobank explained that the CAD was the best performing developed world currency over the past 24 hrs or so.
KEy Quotes:
“The tenacious tone of the loonie is despite the shockingly weak Canadian payrolls data release on Friday. However, it follows a report yesterday indicating house prices rose by a resilient 0.5% m/m in April”.
“The better tone also follows the release of the BoC’s bi-annual review earlier in the week. The latter included a report which highlighted the growth in demand of CAD as a reserve currency since the financial crisis”.
“The BoC states that “according to survey data from the International Monetary Fund, the Canadian dollar accounted for about 1.8 per cent of reported global foreign reserves in the third quarter of 2013”. This follows a tripling in the allocation of reserves into ‘other currencies’ of which the CAD is one”.
“The CAD also note that the world’s official reserves have quadrupled over the past decade to exceed USD11 trn as of December 2013. The BoC attributed the increase in demand for the CAD as a reserve currency to “Canada’s relative economic resilience during the global financial crisis of 2007–09””.
“The question now is as the wounds of the financial crisis gradually heal, do Canada’s economic fundamental justify a continued place for the CAD within central bank reserves?”.
“A weaker currency implies a loosening on monetary conditions and this has likely fed an improvement in many recent Canadian economic data releases with the clear exception of the April jobs report”.
“Overall, we expect a fairly flat outlook for USD/CAD medium-term with a mild downside bias towards 1.08 on a 6 mth view. Near-term, today’s releases of manufacturing sales data will provide direction”.
KEy Quotes:
“The tenacious tone of the loonie is despite the shockingly weak Canadian payrolls data release on Friday. However, it follows a report yesterday indicating house prices rose by a resilient 0.5% m/m in April”.
“The better tone also follows the release of the BoC’s bi-annual review earlier in the week. The latter included a report which highlighted the growth in demand of CAD as a reserve currency since the financial crisis”.
“The BoC states that “according to survey data from the International Monetary Fund, the Canadian dollar accounted for about 1.8 per cent of reported global foreign reserves in the third quarter of 2013”. This follows a tripling in the allocation of reserves into ‘other currencies’ of which the CAD is one”.
“The CAD also note that the world’s official reserves have quadrupled over the past decade to exceed USD11 trn as of December 2013. The BoC attributed the increase in demand for the CAD as a reserve currency to “Canada’s relative economic resilience during the global financial crisis of 2007–09””.
“The question now is as the wounds of the financial crisis gradually heal, do Canada’s economic fundamental justify a continued place for the CAD within central bank reserves?”.
“A weaker currency implies a loosening on monetary conditions and this has likely fed an improvement in many recent Canadian economic data releases with the clear exception of the April jobs report”.
“Overall, we expect a fairly flat outlook for USD/CAD medium-term with a mild downside bias towards 1.08 on a 6 mth view. Near-term, today’s releases of manufacturing sales data will provide direction”.