Loonie Soars against Counterparts

For the 5th straight day now, Canadian Dollar has been able to increase against its US counterpart as the biggest export of the country; oil touched its highest price in last 30 days. This has prompted the investors that they should reverse the near-record bets that the currency will experience a decline. Canadian Dollar, fondly called as Loonie, has soared higher against most of the major counterparts of the same. The discount Canadian oil producers face to the US benchmark lowered to the least value within the last 5 months. On last week, a report came out hinting that the bets by futures traders on decline of Loonie were less than the increase of the same and hence, Loonie was helped. In February, inflation increased to 0.7% from its previous value of 0.1% in January.

According to Greg Anderson, who heads the Group of 10 currency strategy Department at Citigroup, stated that Loonie is short covering at this moment. Incidentally, a short position of an asset denotes that same will decline in near future. Loonie is currently priced at C$1.0161 per USD, as it gained around 0.5% on today. In the period ending on 12th December, Loonie increased for 7 straight days. The Canadian Government Bonds for last 10 years were more or less unchanged at 1.81%. On the other hand, the 2.75% security which is scheduled to mature in June, 2022 currently costs C$107.87. On tomorrow, the Bank of Canada will be auctioning C$3.3 billion of the 10-year notes.

Futures of crude oil currently are priced at $96.16 per barrel after increasing 1.4%. It went to $96.45 per barrel at one point of time, its highest value since 20th February. For the 2nd straight day, the discount between the Canadian benchmark crude oil blends and that of US touched C$16.25, marking its lowest figure since 17th October. Incidentally, on 14th December, it reached a record value of C$42.50.

According to a research note published by CitiGroup, Loonie is currently 2% undervalued against USD and this made many investors feel that Loonie should strengthen further in the near future. According to CitiGroup officials, Canada’s data has not been impressive so far, however, February data is yet to be released.

After shrinking by 0.2% in December last year, Canadian economy soared 0.1% higher in January. The Canadian Government will publish the official report on 28th March.