The Canadian Dollar has been strengthening against the greenback in the past two days, riding on the back of stronger commodities. These were helped by strong data from China, indicating a large trade surplus in April. Since the release of the report on Tuesday, commodities have been advancing through all session, and well into the Asian session the day after.
“I think the markets have concluded that overall global conditions still remain fairly accommodative and therefore as a result you’re seeing commodity currencies a bit stronger,” said Paresh Upadhyaya, head of Americas G10 FX Strategy at Bank of America Merrill Lynch in New York.
He added that “Commodities have been picked up the last day or two and I think you’re seeing that in the currency as well.”
The USDCAD pair opened the Asian session on Wednesday at 0.9561and continued down to as low as 0.9560. This was much lower than the previous session’s low of 0.9584, indicating that the Loonie is continuing its strength against the greenback.
“Canada is getting a net benefit from commodities,” said Michael Gregory, senior economist at BMO Capital Markets.
He added that a simultaneous rally in global equities was a sign that risk appetite had been whetted again, benefiting the Canadian dollar.
Canadian Finance Minister Jim Flaherty said on Tuesday that Canada’s strong currency reflects confidence in its economy, though sharp moves in its value are not welcome.
He said that “We want to avoid sudden jerky movements in the Canadian dollar. We saw that a couple of years ago in 2007 and the prime minister and the governor of the Bank of Canada spoke about it at the time, discouraged speculation in the currency and the dollar came down.”