Speculators have ramped up bearish bets on the Canadian dollar to the highest levels seen on Reuters records going back to 1995, data from the Commodity Futures Trading Commission and according to Reuters calculations. Canadian dollar net short positions surged to 86,215 contracts as of May 9 from 47,704 a week earlier. Last Friday, the loonie hit its weakest level in 14 months at C$1.3793. But the sell-off has since lost some momentum.
"They have pushed it too far out in terms of weakening the Canadian dollar. Given time it will strengthen from here," said Hosen Marjaee, senior managing director, Canadian fixed income at Manulife Asset Management. "It has become relatively stable around C$1.37." US crude prices, which rallied this week after hitting a recent five-month low, settled slightly higher at $47.84 a barrel.
Oil is one of Canada's major exports and the currency's historically close link to the commodity has become stronger in recent weeks. The three-month rolling correlation between the Canadian dollar and oil reached 0.75, its highest since September. At 4 pm EDT (2000 GMT), the Canadian dollar was trading at C$1.3710 to the greenback, or 72.94 US cents, down 0.1 percent, according to Reuters data. The currency traded in a range of C$1.3665 to C$1.3742.
For the week, the loonie fell 0.4 percent. The US dollar fell against a basket of major currencies after weaker-than-expected US economic data raised doubts about whether the Federal Reserve would assume a hawkish bent through the end of the year. Shares of Home Capital fell more than 15 percent after the company said uncertainty around future funding had cast doubt about whether it could continue as a going concern.
Canadian home prices rose in April, lifted once again by hefty price gains in the hot Toronto market which some fear is becoming overheated. Canadian government bond prices were higher across the yield curve in sympathy with US Treasuries. The 10-year climbed 29 Canadian cents to yield 1.573 percent.
Copyright Reuters, 2017