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How the Canadian Dollar Helps You Play the Commodity Market

The Syncrude oil sands extraction facility near the town of Fort McMurray in Alberta Province, Canada.
Mark Ralston | AFP | Getty Images
The Syncrude oil sands extraction facility near the town of Fort McMurray in Alberta Province, Canada.

As an exporter of commodities, Canada is benefiting nicely from high commodity prices. Here's how you can use the loonie to do the same.

The commodity currencies are much more liquid than actual commodities, and also less volatile, says Rebecca Patterson, managing director & chief markets strategist for J.P. Morgan Asset Management, Institutional.

And one commodity currency in particular looks good right now, she told CNBC's Melissa Lee: the Canadian dollar.

Interest rates are part of what make the Canadian dollar attractive, Patterson says, since she anticipates a rate hike from the current 1% in July. Investors' robust appetite for risk right now also helps. But what will really keep the loonie rising is the price of commodities, particularly oil.

"Canada exports a lot of commodities, but oil is the biggie," Patterson says.

The elections taking place todayhave caused some minor weakness in the loonie, but that's all to the good, according to Patterson: "If there's some temporary weakness in the Canadian dollar, great, because the story's intact," she says. "We get a better entry point."

Patterson recommends buying the Canadian dollar against the U.S. dollar at $0.9470 with a target of $0.92 and a stop at $0.9640.

You can watch the whole discussion right here, starting at 10:14.

Tune In: CNBC's "Money in Motion Currency Trading" airs on Fridays at 5:30pm.

"Money in Motion Currency Trading" repeats on Saturdays at 7pm.

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