Tags: Canadian dollar, Currency:CAD, US dollar, the euro, the pound, forecast,
The Canadian dollar is at risk of losing ground against the US dollar and other low-yielding 'safe-haven' currencies (including the pound and Yen) as weak equity markets provide a drag. This comes despite a decent start to the new week for CAD (See below).
A briefing from Shaun Osborne at TD Securities notes that the S&P 500 - the broadest indicator of equity performance - is likely to under-perform further:
"The market has struggled to better the 1475 area even with the support of additional Fed easing in the past few weeks and weakness through the 1425 area leaves it open to some further losses now, we feel. The CAD is influenced by many things—short-term spreads and commodity prices among the factors—but none more so than risk assets in the recent past. Weakness in stocks in the next few weeks will be a positive for USD/CAD.
Today's performance has been a largely positive one for the Canadian dollar as stocks have found support heading into the North American session.
"In FX, JPY is underperforming, down 0.3% on Softbank’s bid for Sprint, while GBP, AUD, and EUR remain unchanged as CAD strengthens," says Eric Theoret at Scotiabank.
Theoret is rather more optimistic about the Canadian dollar forecast compared to rivals TD Securities:
"Investors continue to favour short USD and EUR positions as they maintain their net long CAD position near its record high around $10bn. For CAD, a rapid unwinding of the net long position remains a risk, but it has yet to materialize as investors remain quite bullish."
CAD is stronger, outperforming most of the majors:
The pound Canadian dollar exchange rate is 0.23 pct in the red at 1.5721.
The euro Canadian dollar rate is 0.13 pct lower at 1.2679.
The US dollar to Canadian dollar exchange rate is 0.2 pct down at 0.9784.