Canadian dollar firm in face of global storm


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When the Canadian dollar drew level with the US dollar in 2007, Canadians found a rare source of gloating against their brasher southern neighbours.

The collapse of Lehman Brothers may have put paid to the loonie's strength, but the currency has held up well as another financial crisis grips the euro zone.

The Canadian dollar recovered parity with the US dollar in the middle of last year, although it dipped below par last month. But the currency has rallied 3.1 per cent this month to $0.983.

The Canadian dollar is "going through an extremely bullish phase right now", said Gaurav Kashyap, a trader at Alpari Middle East, an online currency trading house.

Their economy is "one of the few shining examples left among leading nations".

The major factor driving the Canadian dollar is its place among the so-called "commodity currencies" - including the Australian dollar, the Brazilian real and the South African rand - because of the country's natural resources.

These currencies have soared since the financial crisis began as the US dollar weakened and Asian demand for energy and raw materials surged.

The Canadian dollar was battered last month amid a US dollar rise and fears about the effect of the euro-zone sovereign-debt crisis on global growth, said Neil Mellor, a senior currency strategist at BNY Mellon.

"The Canadian dollar is trading more as a currency that's highly sensitive to the global economy" than through economic fundamentals, he said.

The loonie also comes with fewer strings attached than other currencies, such as the Japanese yen and the Australian dollar, which have risen sharply as a hedge against a slowdown in other developed economies.

The Swiss franc, a favourite of currency traders betting on the weakness of the euro zone, was pegged to the euro last month by the Swiss National Bank.

Heather, the Totality
Matthew Weiner,
Canongate 

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