Photographer: Brent Lewin/Bloomberg

Loonie Extends Rally as Funds Cover Shorts on BOC Comments

  • Market caught short Canadian dollar, says Amplifying Global FX
  • Australian, New Zealand dollars also outperform G10 currencies

The Canadian dollar outperformed all its Group-of-10 peers, extending gains as Asian funds bought in response to hawkish comments Monday from Bank of Canada’s Senior Deputy Governor Carolyn Wilkins.

Four out of five clients were buyers of the loonie early Tuesday, according to an Asian-based FX trader who asked not to be named because the person isn’t authorized to speak publicly. The currency rose above below its 200-day moving average on Monday and has gained about 1.5 percent against the dollar since Friday.

“USD/CAD has broken a recent uptrend, Canadian yields have jumped sharply, and market positioning has been caught out well short the Canadian dollar,” said Greg Gibbs, founder of Amplifying Global FX Capital in Colorado. “This creates a risk of further significant gains in CAD near term.”

In a speech in Winnipeg, Manitoba, Wilkins highlighted how the nation’s recovery is broadening across regions and sectors. “As growth continues and, ideally, broadens further, Governing Council will be assessing whether all of the considerable monetary policy stimulus presently in place is still required,” she said.

  • USD/CAD down 0.4% to 1.3278 versus 1.3274-1.3325 range
    • EUR/CAD most traded cross other than U.S. dollar, spot now down 0.4% to 1.4865 after losing 1% overnight; small bids approaching 1.4822 50-DMA
    • One month risk reversals poised to turn negative (USD puts favored over calls) for the first time since late 2009
  • AUD/USD gains 0.2% to 0.7558 versus 0.7539/65 range
    • Spot rose initially on purchases against EUR which saw buy stops above 100-DMA triggered before easing back to that level: trader
    • Capacity utilization rate component from NAB business data at 82.4% versus 81.4% prior and the strongest in 6 months
  • NZD/USD up 0.3% to 0.7218 versus 0.7192-0.7222 range
    • Advanced on demand from the same client segment seen in the Aussie with traders remaining long ahead of buy-stops above 0.7223 June 8 high: trader

— With assistance by Netty Idayu Ismail

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