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USD/CAD Reaches 1.01 on Demand for Riskier Assets

The Canadian dollar reached its highest level in seven weeks against its U.S. counterpart as appetite for risk assets outweighed the deteriorating economic outlook in the commodity-exporting nation.

The currency strengthened as a report showed a 0.2 percent February gain in new home prices, up from a 0.1 percent rise the month before. Slowing growth is prompting economists to cut forecasts on two-year government bonds the most in more than a year as they push out projections for Bank of Canada interest- rate increases, according to a Bloomberg survey. U.S. stocks rose for a fourth day as U.S. jobless claims dropped more than forecast. The currencies of Canada’s commodity-exporting peers, Australia and New Zealand, rose as lending in China expanded more than analysts projected.

“We have a lot of bad news baked into Canada, but we don’t have a lot of good news, so I think we’ve already seen the bad- news story play out in terms of what’s been priced in,” said Camilla Sutton, head of currency strategy at Bank of Nova Scotia (BNS), by phone from Toronto. “There are a lot of things that should end up supporting the Canadian dollar as we get into next year and even late this year, that’s everything from a housing market that doesn’t collapse as some people feel to oil pricing that’s already turned much more favorably for the Canadian economy.”

Bloomberg [1]

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