Canadian Dollar Gains Most Since 1950 as Risk Appetite Rises

[IE]

Canada?s currency rose the most in a month since the Korean War as investors stepped out of the haven of the U.S. dollar in search of assets with higher returns.

?Traders and speculators continue to push, and the U.S. dollar is so receptive to weakness that it?s an easy case to make,? said Eric Lascelles, Toronto-based chief economics and rates strategist at TD Securities Inc. ?It?s the risk-appetite story right now that?s dominant.?

The Canadian currency, known as the loonie for the aquatic bird on the one-dollar coin, rose 9.3 percent this month, the most since at least October 1950, according to data from the Bank of Canada and Bloomberg. Stocks advanced and commodities rallied, led by energy, as the slumping greenback boosted demand for raw materials as a hedge against inflation. Raw materials account for more than half of Canada?s export revenue.

The loonie appreciated to C$1.0915 per U.S. dollar in Toronto yesterday, from C$1.1925 on April 30. It touched the strongest level yesterday since Oct. 6, C$1.0892. One Canadian dollar buys 91.61 U.S. cents.

In 1950, Canada sent three warships to join the United Nations effort in the Korean conflict, construction got under way on the Trans-Canada Highway and the nation?s population was 13.7 million, about 40 percent of today?s count of 33.7 million.

Canada?s dollar was fixed to the U.S. currency from the founding of the Bank of Canada in 1934 until after World War II, according to the central bank?s Web site. It was allowed to float from 1950 until 1962, and then again from June 1970.

current bank trading rate: 1.0687.......

 

[DOGS THAT BARK]

Good article IE
I was debating between Assie $ and Canadian $ on hedge against U.S. $--opted for Assie for slight edge on natural resources--

Here is another article out today from Bloomingberg along same lines as your article.

• Commodities headed for the biggest monthly rally in 34 years, led by energy, as the slumping dollar boosted demand for raw materials as a hedge against inflation.
• In May, the Reuters/Jefferies CRB Index of 19 energy, metal and agricultural prices has gained 14 percent, the most since July 1974. The dollar was poised for the biggest monthly drop since August against a basket of six major currencies.
• Crude oil was set for the biggest monthly gain in a decade. Gasoline has soared more than 30 percent in May. Gold & copper surged, while corn and soybeans reached the highest since September. (all excellent things for the nascent "green shoot" consumer recovery)

Ironic quote of the day comes here

• Investors are seeking a ?safe haven from a weaker dollar,? said Stephen Platt, a commodity analyst at Archer Financial Services Inc. in Chicago.

A safe haven FROM the weaker dollar? Just 60 days ago the dollar WAS the safe haven. But in the A.D.D. era of computer trading dominance where we change our minds on a weekly basis, that whole story is over and now we're back to fleeing the dollar. That's just how the short term oriented casino now works. Boo Yah.
But Australia and Canada (resource dominant countries) are seeing the exact opposite.

• Canada?s currency headed for the biggest monthly gain since the Korean War as commodities surged, global stocks rallied and the U.S. dollar tumbled. The Canadian dollar rose 8.8 percent since April 30, the most since at least October 1950.
• ?This does seem like a historic move,? said David Watt, a senior currency strategist in Toronto at RBC Capital Markets. ?The biggest driver has been the decline in general fear, compounded by an increase in specific fear for the U.S. dollar, which might or might not be appropriate.?
• The loonie, as Canada?s dollar is known, dropped a record 18 percent last year on plummeting prices for commodities, which generate more than half the nation?s export revenue.
• The dollars of New Zealand and Australia, which like Canada?s tend to trade in tandem with stocks and commodity prices, added 13 percent and 10 percent respectively this month against the greenback, as the prospects for global growth improved.

 

[selkirk]

it is incredible how quickly these sectors can run up and down, ie. gold, oil, resources.

the dollar did not skip a beat when the cdn. government which said the deficit would be above 50 billion, before stating the number would be at 30 billion. Canada has al lower debt when compared to GDP than other nations, (ie. G7, ect).

when resources rally currency traders buy the cdn. and Aus dollar, and when they fall down it goes.

thought gold may pull back, however it seems to make a run along with the rest of resources. if this continues it will put upward pressure on something called (inflation).

biggest gold holding yri, own some abx. small amount of goldcorp.
wish I owned jr. golds, espcially in nov. dec. though have avoided the group this time. just sr.

energy own TLM, Suncor, Canadian oil sands, CNQ (canadian natural), NAE.un (toronto ), Nexen.

should have bought back a position in Encana however prefer oil to natural gas, in short term. natual gas will move if market stays bullish.

believe financials will lag resources.

thanks
selkirk

 

[djv]

I am useing the EWC for a hedge.
It does have RIMM and POT in it for some support.