The loonie is having a rocketing performance versus its U.S. counterpart even after a negative economic report in Canada indicated a higher-than-expected shrinking rate for the nation’s economy, reaffirming the high current risk appetite among traders.
The Canadian dollar reached a 10-month high versus the greenback last Friday as traders are heavily driven by risk appetite, betting in commodities and stocks, consequently affecting positively Canada’s currency, which is strongly linked to crude oil rates, since this commodity is one of the main Canadian exports to the United States and several other countries. A report last week also indicated that the Canadian gross domestic product shrank more than analysts’ expectations, but since the sentiment towards the U.S. dollar is so negative currently, and risk appetite is still on the rise, and the Canadian dollar was barely affected by the report indicating a worrying recession in the country.
Economists analyze the Canadian dollar’s situation as better than other G-8 country members current economic profile and this is a strong factor to keep the loonie’s attractiveness high, even if Canada did not find a way out of recession. Currency strategists affirm that even if the loonie can be considered overpriced for the moment, it is unlikely that is rates will fall due to the strong demand for risk.
USD/CAD closed on Friday at 1.0779 from 1.0855 in the beginning of the week.
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