Loonie Gains against USD on Lower Oil Discount

The major currency of Canada, the Canadian Dollar, also known as Loonie rose from its weakest figure of this month against USD, thanks to the fact that the discount the Canadian crude oil trades with the American counterpart was at the lowest level in the last 3 months. Loonie actually marked its first gain in the last 4 days. Incidentally, Mark Carney, the Bank of Canada Governor stated that the requirement of raising the interest rates is less imminent now than what was anticipated earlier. Loonie increased by 0.2% against USD and is at C$1.0027 per USD currently. Incidentally, on yesterday, it decreased to C$1.0087 marking its weakest value since 28th January. Not only against Loonie, but USD experienced decline today against most of its major counterparts. The overall trade direction for USD was of selling for today. The options traders were possibly the most bearish on the Canadian Dollars in the last 2 weeks.

The 25 Delta Risk Reversal Rate for last 3 months jumped up to 1.16 percentage point for Canada, marking its highest figure since 29th January. This rate denotes the premium which is charged for rights to buy USD versus the contracts to sell. On 5th February, the rate reached 0.91 percentage point, however, recovered from that position over the time.

The Government bonds of Canada experienced a fall as the yield on the benchmark 10 year note jumped up by 3 basis points and is at 2% currently. The 2.75 percent security which is to mature in June, 2022 experienced a decline of 24 cents and is at C$106.35 now. The 2-year yields jumped up by 1 basis point and are at 1.12% currently. On tomorrow, the Canadian Government is going to auction 2-year notes with total worth of $3.29 billion. Incidentally, the 1 percent securities are due in May, 2015.

As demand forecast by OPEC was increased, the biggest export of Canada, Crude Oil surged up to the highest level in 7 days. The futures on crude oil increased by 0.4% for each barrel and are currently at $97.79, marking its highest value since 1st February.

According to PPHB Securities LP’s estimates, the Canadian companies are forging around C$2.5 billion every month because of the lower prices. The difference between trade deficit and trade surplus is actually causing the economy around C$27 billion every year.