Canadian Dollar Snaps Longest Losing Streak Since January on Oilby and
Currency gains as oil rises above $47 on lower Brexit concern
Loonie higher even as data showed inflation rate eased in May
The Canadian dollar snapped the longest steak of losses since January as crude oil prices advanced.
The currency remained higher even as a report showed Canada’s inflation rate eased in May as food costs rose at the slowest pace in more than two years. Oil climbed back above $47 a barrel and commodities gained amid increased demand for riskier assets on speculation that the U.K. referendum is less likely to result in a vote to leave the European Union.
"Everything is going the Canadian dollar’s way: better risk appetite or certainly less risk aversion, higher oil prices and narrower spreads," said Shaun Osborne, chief foreign-exchange strategist at Bank of Nova Scotia in Toronto. "It suggests the Canadian dollar is going to stay on a slightly better footing, but I don’t think we’re going to see a big push up at this stage."
The loonie, as the currency is nicknamed, has returned 7.7 percent this year, the second-best performing Group-of-10 currency after the yen. The commodity-dependent country’s economic recovery from lower oil prices has been mixed and Bank of Canada governor Stephen Poloz called for "patience," saying the Canadian economy will recover on the back of the U.S. economy.
The Canadian dollar gained 0.9 percent to trade at C$1.2845 per U.S. dollar at 10:37 a.m. in Toronto, halting six straight days of declines.
Futures on crude oil, among Canada’s largest exports, rose 2.4 percent to $47.31 a barrel in New York. The Bloomberg Commodities Index advanced 1.3 percent.
"The biggest story this morning for the Canadian dollar is that commodity prices, particularly oil, have bounced," said Greg Anderson, global head of foreign-exchange strategy at Bank of Montreal’s BMO Capital Markets Corp in New York.
The consumer price index advanced by 1.5 percent in May from a year ago, following the April rate of 1.7 percent, Statistics Canada said Friday from Ottawa. The core rate that excludes eight volatile products slowed to 2.1 percent in May from April’s 2.2 percent. Economists surveyed by Bloomberg News forecast the total inflation rate would be 1.6 percent and core 2.1 percent.
Hedge funds and other large speculators started betting in the Canadian dollar’s favor in April, ending their longest sustained bearish stance since 2001, according to data from the Commodity Futures Trading Commission. Bullish positions exceeded bearish bets by a net 21,537 contracts as of June 7.
The Canadian dollar will weaken to C$1.30 by the end of the year, according to forecasts compiled by Bloomberg.
If the U.K. elects to leave the EU, the Canadian dollar might head to C$1.33 or C$1.34 per U.S. dollar, Anderson said. It will stay between C$1.28 and C$1.31 until the vote, he said.