Loonie Rallies Based on US Data

The Canadian Dollar, also known by its nickname Loonie, jumped up against its US counterpart marking its highest figures in last 2 weeks. Thanks to a private report showing that US private sector has increased more than the initial forecast, the investors are now hopeful that the largest trading partner of Canada is finally back on track and the US economy is picking up speed as well.

Not only against USD, Loonie increased against other major peers as well and that lists Euro as well. ADP Research Institute, a New Jersey based institute stated that on a whole, the US private sector has shown better growth than expectations in the last month of 2012. Incidentally, on tomorrow, both US and Canadian Government will be releasing reports on the private sector conditions. In earlier half of today, Loonie experienced slumps against USD as many investors were concerned that the US Policy makers will find it hard to raise the borrowing limit of the country, which is absolutely necessary for the betterment of the US economy. There were reasons behind investors’ concerns as well. The Republican politicians made calls so that the deficit can be reduced through spending cuts. In addition, they also promised to use a debate on increasing US’s debt ceiling and thereby forcing concessions.According to Eimear Daly, who works as the Currency Market Analyst of Monex Europe Ltd., the Canadian Dollar has been greatly helped by the positive private sector results of US and as the Government data is coming out on tomorrow, investors are hopeful for a bigger surge.

Incidentally, on yesterday, Loonie reached its highest level since 18th December. Today, it is trading against USD at a rate of 98.52 cents per USD. When it comes to Euro, a single Canadian Dollar now costs 0.7741 Euro.

There was another factor behind the earlier declines of Loonie as well, as explained by the Senior Foreign Exchange Strategist of Societe Generale SA, Sebastian Galy. Sebastian rightfully stated that the Loonie has experienced a really long rally and thereby many investors became concerned that the rally was kind of overstretching. For investors, the best model is that they bet on a particular currency and make the right predictions. Once the profits are realized, they start taking the same. In case of Loonie, it showed very strong performance throughout, thereby creating negative sentiment.