The Loonie Is Ready for Takeoff: Strategist

Tuesday, 21 Aug 2012 | 8:02 AM ET
A series of condominium construction projects stand in Toronto, Ontario, Canada.
Brent Lewin | Bloomberg | Getty Images
A series of condominium construction projects stand in Toronto, Ontario, Canada.

The Canadian dollar is poised to lift off, this strategist says.

If you were to glance quickly at recent Canadian economic statistics, you would probably see a mixed bag. GDP rose in June, but the trade deficit rose that month and the jobless rate rose in July, and so on.

Even so, "the central bank has maintained its hawkish rhetoric," say the currency strategists at Wells Fargo . That's a potential plus for the Canadian dollar.

Investor positioning could also lift the loonie, the strategists say. They note that net long positions rose in early August, but they are "still only a third of the long positions in May." That means there are plenty of investors who could pile into the currency if they see signs that loonie strength is coming.

All in all, the strategists wrote in a note to clients, if market conditions keep improving, "prospects for higher Canadian policy rates should support the loonie’s broad outperformance. Long-speculative positioning is relatively light, which should also be a positive for the currency."

Stay tuned.

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