Monday, July 11, 2011

Bank of New York Mellon gives outlook for USD/CAD

Currency strategists at Bank of New York Mellon claim that Canadian dollar may get under pressure in the near term versus its US counterpart, while its longer-term prospects are quite bullish.  

Last week loonie got support from stronger than expected Canadian employment data, but then dropped after poor US employment figures as investors’ risk aversion strengthened. The specialists claim that Canada’s currency will be affected by US economic weakness. In their view, the pair USD/CAD may reach parity during the next 3-4 months. 

In the longer term, however, the bank expects loonie to gain against the greenback. In their view, Canada’s dollar will benefit from rising oil prices as the nation has got some of the largest reserves in the world. As a result, BNY Mellon expects loonie to run in 2012 to 0.90 per dollar.

Analysts at RBC Capital Markets also see upward potential in loonie. According to them, Canadian currency will reach 0.94. The bank, however, has doubts about the near-term outlook. The specialists think that the Bank of Canada will raise the interest rates, though they aren’t as sure as earlier. In their view, it’s necessary to watch the central bank’s monetary policy report that is published on July 20.

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