Loonie rises on back of U.S. dollar weakness
The Canadian dollar rose against the greenback for the first time in months.
The loonie rose to 75 cents U.S. against the U.S. dollar for the first time since last September, driven by the Bank of Canada’s more aggressive approach to interest rate hikes compared to the U.S. Federal Reserve.
“We look for the USD to soften broadly in the second half of a financial year (H2) as the Fed cycle nears its peak and investors look to move out of the safer USD into riskier, higher-yielding assets,” Shaun Osborne, managing director and chief FX strategist at Scotiabank, wrote in a note to clients on Friday.
He noted more U.S. dollar weakness is hard to rule out in this environment, which could cause the loonie to rise further, though for now he believes is it trading at fair value.
“In the very short run, the Canadian dollar (CAD) may have realized its potential,” Osborne wrote.
In the long run, if the U.S. dollar continues to show volatility, another currency expert sees extended upside for the loonie.
"The Canadian dollar could push back through the 77-cent mark," Karl Schamotta, chief market strategist at Corpay, told BNN Bloomberg in an email on Friday.
Schamotta also noted that the loonie is simultaneously benefiting from possible strength in the Chinese market.
"Hopes of a broad-based increase in Chinese stimulus - particularly infrastructure spending - are lifting commodity-linked currencies," he said.
The loonie rose to 75 cents U.S. against the U.S. dollar for the first time since last September, driven by the Bank of Canada’s more aggressive approach to interest rate hikes compared to the U.S. Federal Reserve.
“We look for the USD to soften broadly in the second half of a financial year (H2) as the Fed cycle nears its peak and investors look to move out of the safer USD into riskier, higher-yielding assets,” Shaun Osborne, managing director and chief FX strategist at Scotiabank, wrote in a note to clients on Friday.
He noted more U.S. dollar weakness is hard to rule out in this environment, which could cause the loonie to rise further, though for now he believes is it trading at fair value.
“In the very short run, the Canadian dollar (CAD) may have realized its potential,” Osborne wrote.
In the long run, if the U.S. dollar continues to show volatility, another currency expert sees extended upside for the loonie.
"The Canadian dollar could push back through the 77-cent mark," Karl Schamotta, chief market strategist at Corpay, told BNN Bloomberg in an email on Friday.
Schamotta also noted that the loonie is simultaneously benefiting from possible strength in the Chinese market.
"Hopes of a broad-based increase in Chinese stimulus - particularly infrastructure spending - are lifting commodity-linked currencies," he said.