The Canadian dollar is looking good
A surge of more than 40% in oil prices has helped make the Canadian dollar one of this year’s best-performing major currencies. That resiliency could soon be tested if crude loses momentum.
Many forecasters appear sceptical about the prospects for oil to advance much beyond its current level, potentially sapping some support from the loonie. West Texas Intermediate was at around USD64.00 per barrel on Friday (12 April) and the median forecast in a Bloomberg survey is for it to end the year around USD63.00.
The Canadian dollar has advanced 2.4% this year against the US currency, trailing only the British pound among its G-10 peers. Oil has provided some buoyancy, but Canada’s domestic picture has been more cloudy. There is mounting concern about household indebtedness, home prices are dropping, and growth practically ground to a halt in the final part of 2018.
While growth numbers for January were more upbeat and unemployment remains close to multi-decade lows, the central bank has become more circumspect. Bank of Canada (BOC) Governor Stephen Poloz this month suggested that he is settling into a holding pattern on interest-rate policy. The global slowdown, coupled with a housing sector that is taking longer to adjust to tighter mortgage rules and higher rates, means the economy still needs the help of low borrowing costs, the BOC boss said.
“Canada’s got to worry about an additional factor that the US doesn’t at this point, and that is the fact that our household sector is extremely leveraged,” said a Toronto-based strategist. “It could prove to be a much more prolonged slowdown given that you may see households deleveraging.”
Not all observers are so pessimistic though. Some market watchers see a weak greenback environment fuelling commodity-price gains and boosting Canada’s terms of trade, and say there is room for improvement in the currency if crude prices continue to rise. – Bloomberg News.
The US Dollar Index (DXY) fell 0.21% to 96.972 on Friday (12 April). The euro was 0.41% higher at USD1.1299. The pound gained 0.12% to USD1.3074. The yen weakened 0.32% to 112.02 per dollar.
The information published by DBS Bank Ltd. (company registration no.: 196800306E) (“DBS”) is for information only. It is based on information or opinions obtained from sources believed to be reliable (but which have not been independently verified by DBS, its related companies and affiliates (“DBS Group”)) and to the maximum extent permitted by law, DBS Group does not make any representation or warranty (express or implied) as to its accuracy, completeness, timeliness or correctness for any particular purpose. Opinions and estimates are subject to change without notice. The publication and distribution of the information does not constitute nor does it imply any form of endorsement by DBS Group of any person, entity, services or products described or appearing in the information. Any past performance, projection, forecast or simulation of results is not necessarily indicative of the future or likely performance of any investment or securities. Foreign exchange transactions involve risks. You should note that fluctuations in foreign exchange rates may result in losses. You may wish to seek your own independent financial, tax, or legal advice or make such independent investigations as you consider necessary or appropriate.
The information published is not and does not constitute or form part of any offer, recommendation, invitation or solicitation to subscribe to or to enter into any transaction; nor is it calculated to invite, nor does it permit the making of offers to the public to subscribe to or enter into any transaction in any jurisdiction or country in which such offer, recommendation, invitation or solicitation is not authorised or to any person to whom it is unlawful to make such offer, recommendation, invitation or solicitation or where such offer, recommendation, invitation or solicitation would be contrary to law or regulation or which would subject DBS Group to any registration requirement within such jurisdiction or country, and should not be viewed as such. Without prejudice to the generality of the foregoing, the information, services or products described or appearing in the information are not specifically intended for or specifically targeted at the public in any specific jurisdiction.
The information is the property of DBS and is protected by applicable intellectual property laws. No reproduction, transmission, sale, distribution, publication, broadcast, circulation, modification, dissemination, or commercial exploitation such information in any manner (including electronic, print or other media now known or hereafter developed) is permitted.
DBS Group and its respective directors, officers and/or employees may have positions or other interests in, and may effect transactions in securities mentioned and may also perform or seek to perform broking, investment banking and other banking or financial services to any persons or entities mentioned.
To the maximum extent permitted by law, DBS Group accepts no liability for any losses or damages (including direct, special, indirect, consequential, incidental or loss of profits) of any kind arising from or in connection with any reliance and/or use of the information (including any error, omission or misstatement, negligent or otherwise) or further communication, even if DBS Group has been advised of the possibility thereof.
The information is not intended for distribution to, or use by, any person or entity in any jurisdiction or country where such distribution or use would be contrary to law or regulation. The information is distributed (a) in Singapore, by DBS Bank Ltd.; (b) in China, by DBS Bank (China) Ltd; (c) in Hong Kong, by DBS Bank (Hong Kong) Limited; (d) in Taiwan, by DBS Bank (Taiwan) Ltd; (e) in Indonesia, by PT DBS Indonesia; and (f) in India, by DBS Bank Ltd, Mumbai Branch.