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Barrons - Canadian Dollar Higher After Better Domestic Trade Data
Thursday, 02 April 2015
TORONTO--The Canadian dollar advanced for the second consecutive day Thursday after encouraging domestic trade data pulled investors away from the safety of the U.S. dollar.
The U.S. dollar was most recently at C$1.2565, from C$1.2621 late Wednesday, according to data provider CQG.
Trading is expected to be muted over the weekend because of the Good Friday holiday.
The loonie grinded higher throughout the day following a narrowing of Canada's trade deficit to 984 million Canadian dollars ($779.3 million) in February from a revised deficit of C$1.48 billion in January. Economists expected Canada to report a February trade deficit of C$2.0 billion.
Ken Wills, head of corporate dealing and sales for North America at CanadianForex in Toronto, said that the Canadian dollar has room to strengthen in the coming weeks with the U.S. dollar projected to move lower to the C$1.24 range if oil moves comfortably above $50 a barrel.
"Volatility has leveled off over the past couple weeks compared to what we saw in the past quarter," he said. "It seems that markets have gotten over the central bank freak-out and things have settled down."
With few major developments on the horizon next week, the Canadian dollar is likely to settle into a range with the greenback expected to trade between C$1.24 and C$1.28, analysts said.
Still, investors remain attuned to the next Bank of Canada rate policy announcement on April 15, which will also include the release of the Monetary Policy Report. While it is unlikely that the central bank will issue another cut in its overnight rate, the quarterly report will likely contain a closer look at the impact that the lower price of oil has had on the Canadian economy.
"As we come to any Bank of Canada [announcement] these days, we're telling clients to be pretty cautious," Mr. Wills said.
"We're seeing more of a negative tone to the Canadian economy and that in turn has been hurting the Canadian dollar."
