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5 Jul 2013
Flash: USD/CAD more room to run, 1.11 by year end - TDS
FXstreet.com (Barcelona) - Despite the Canadian economy looks poised to enjoy healthy growth numbers, mainly on a stronger U.S., it will nevertheless consistently underperform the former, says Eric Green, Head of Research for Rates and FX at TDS.
Green believed that "as rates move higher and US equities continue to outperform those in Canada, much of the cash pushed into Canada from US accounts in search of yield is set to diminish and eventually unwind."
Green still sees no end in sight to the current hysteria to bid the USD/CAD higher mid term, arguing that if favourable conditions for the USD/CAD led to a failure to consistently hold the parity level in the past, now that the tide is turning in favour of the USD and the U.S., Green struggles to conceive how that will not led to further appreciation on the USD/CAD.
From Green: "Over the past five years the US slashed rates, engaged in massive Fed balance sheet expansion (while the BoC raised rates to 1.0%), and suffered a massive credit crisis that our neighbor to the north largely avoided. Through this period the CAD struggled to sustain any move through parity. As all these factors supporting CAD strength begin to unwind, it is reasonable to presume that the sell-off in CAD to 1.05 has more room to run. Our currency strategist continues to target 1.11 by year-end."
Green believed that "as rates move higher and US equities continue to outperform those in Canada, much of the cash pushed into Canada from US accounts in search of yield is set to diminish and eventually unwind."
Green still sees no end in sight to the current hysteria to bid the USD/CAD higher mid term, arguing that if favourable conditions for the USD/CAD led to a failure to consistently hold the parity level in the past, now that the tide is turning in favour of the USD and the U.S., Green struggles to conceive how that will not led to further appreciation on the USD/CAD.
From Green: "Over the past five years the US slashed rates, engaged in massive Fed balance sheet expansion (while the BoC raised rates to 1.0%), and suffered a massive credit crisis that our neighbor to the north largely avoided. Through this period the CAD struggled to sustain any move through parity. As all these factors supporting CAD strength begin to unwind, it is reasonable to presume that the sell-off in CAD to 1.05 has more room to run. Our currency strategist continues to target 1.11 by year-end."