Oil Triggers CAD Rally

The Canadian dollar is liable to be blocked close to the 1.18 region against the US dollar in the near term even if oil prices trigger further near-term Canadian gains.

After early losses, the Canadian dollar strengthened sharply to highs beyond the 1.19 level against the US currency on Monday with notable gains against the Euro. The currency gained support from generally improved risk appetite and a rally in oil prices.

There will be unease over the Canadian economy, especially as there will be an important negative impact on the Canadian industrial sector. There should still be some degree of support given the relative fundamental outlook in view of very serious US vulnerabilities with the Bank of Canada less likely to pursue a policy of aggressive quantative easing.

Trading volatility remained high on Tuesday with the Canadian currency holding firmer than 1.20 even though the US currency continued to advance against the Euro with crude oil prices testing the US$50 per barrel level.

Investica
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