Safe-Haven premium seen supporting the Canadian dollar long-term but for today CAD is taking a thumping

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Published on Friday, 10 August 2012 12:41

Written by Rob Samson

International Money Transfers at our sister site

"On the charts, the steady trend lower this week has moderated a little overnight but the underlying dynamics are still USD-negative" - TD Securities.

The Canadian dollar (Currency:CAD) is taking a bit of a thumping today, but a look at the bigger picture shows a Canadian currency in rude health.

The pound to Canadian dollar exchange rate is 0.25 pct higher at 1.5543.

The euro to Canadian dollar exchange rate is 0.15 pct up at 1.2204.

The US dollar to Canadian dollar rate is 0.42 pct higher at 0.9955.

Yesterday, hawkish commentary from Bank of Canada Governor Carney overnight saw the CAD gain across the board Thursday in New York.


Carney noted that the Canadian economy is in a “very different place” than its peers, and that withdrawal of some of the monetary stimulus may become appropriate as the economy grows consistently above the trend. In a thin market, EURCAD dropped steadily as investors diversified away from the EUR and into to a ‘safer’ CAD.

"In fact, Carney noted that besides strong fundamentals, there is an “element of safe-haven premium” supporting CAD. Relatively weak Canadian data today – June trade deficit CAD1.81 bn, the widest in 21 months, July housing starts -13.6k - did not deter CAD bulls," notes Chris Walker at UBS.

That said, there is an obvious contradiction in that on a risk-off day such as being witnessed today, a typical safe-haven currency would be in demand.

The CAD certainly is not, nevertheless a step-back shows that the mere ability of the CAD to hold value over the course of a volatile year is enough proof of the desirability of this currency.

The ascent of the CAD against the USD in particular remains entrenched.

"On the charts, the steady trend lower this week has moderated a little overnight but the underlying dynamics are still USD-negative.  We look for intraday resistance in the 0.9955/65 area.  Support is 0.9900/10, then 0.98," says Shaun Osborne at TD Securities.