Personal Finance

The Canadian Dollar and its Ups and Downs

  • Last Updated:
  • Mar 16th, 2015 1:54 pm
Tags:
None
Banned
User avatar
Feb 15, 2008
26318 posts
3217 upvotes
Calgary
I'll repeat it again, in the hope that there won't be spam -- there is an outsized (on a historical basis) speculative short interest against the Canadian dollar (see CoT reports). Fundamentally the Canadian dollar should be at least par, if not higher due to Canada's robust export capacity and general state of trade surpluses. A slowing of or even cessation/reversal of expansion of credit in CAD$ terms, which appears to be in the process of occurring, is highly favourable to the Canadian dollar.

63 cents was the result of Canada being in a severe commodities depression, and a very strong US dollar. Over the long term, I expect a full inversion of the 63 cent bottom (ie: 1/0.63) to occur, at least temporarily, as the US continues its long-term path of weakening as an economy, while Canada continues powering forward. Despite this recent short-term set-back, the secular bull market for the Canadian dollar is still well intact.

With such an abundance of mis-placed negative sentiment, reversals can be sharp and outsized. Especially if BoC policy actions do not live up to the very significant expectations that have been telegraphed to the market by the BoC governor.
TodayHello wrote: ...The Banks are smarter than you - they have floors full of people whose job it is to read Mark77 posts...
Deal Addict
Feb 10, 2013
4121 posts
743 upvotes
Richmond
is Boc hoping us companies will come and invest up here while their encomomy is dying? . a strong dollar imo equals lower inflation and decent for min wage workers. I guess Boc wants Canada to go more in debt offering welfare to folks who cannot afford food due to inflation
Banned
User avatar
Feb 15, 2008
26318 posts
3217 upvotes
Calgary
bluebellrose wrote: is Boc hoping us companies will come and invest up here while their encomomy is dying? . a strong dollar imo equals lower inflation and decent for min wage workers. I guess Boc wants Canada to go more in debt offering welfare to folks who cannot afford food due to inflation
Most of us have only lived in an era of a weak CAD$. So the tendency is to believe that the norm is weak. That's why you see a lot of bias towards weakening that has little fundamental support in the actual data itself.

Yes, the CAD$ may very well go up significantly, but this is actually good for business as it keeps the cost of capital low. Despite the weakening of the CAD$, there's been no capital flight, the bond market has actually gone up representing a vote of confidence in the CAD$ despite the ~10% loss experienced in the past year.
TodayHello wrote: ...The Banks are smarter than you - they have floors full of people whose job it is to read Mark77 posts...
Deal Addict
User avatar
Feb 25, 2004
1374 posts
91 upvotes
416
"So, where's the best place to buy 10,000 American Dollars (USD) today without opening some fancy ForEx trading account with XE / OANDA "
Banned
User avatar
Feb 15, 2008
26318 posts
3217 upvotes
Calgary
grilw wrote: "So, where's the best place to buy 10,000 American Dollars (USD) today without opening some fancy ForEx trading account with XE / OANDA "
If you could get yourself up to Pearson airport, and have a t-shirt printed up with "I sell Canadian dollars", you could probably do okay standing just outside of Int'l arrivals and convert your money at the spot rate, if not slightly better. But for the rest of us, plunking down the $200 in forex commission at the local bank branch is probably as good as its gonna get.
TodayHello wrote: ...The Banks are smarter than you - they have floors full of people whose job it is to read Mark77 posts...
[OP]
Sr. Member
User avatar
Nov 23, 2010
566 posts
68 upvotes
Montreal
Did anyone notice this? When the overseas market opens (evening time in Canada) the CAD goes up. But, the next morning it starts to go down after the North American market opens. Invisible Forces are drowning it intentionally.
Banned
User avatar
Feb 15, 2008
26318 posts
3217 upvotes
Calgary
radiko wrote: Did anyone notice this? When the overseas market opens (evening time in Canada) the CAD goes up. But, the next morning it starts to go down after the North American market opens. Invisible Forces are drowning it intentionally.
Seems to be the case with gold as well. Which is subject to a lot of speculative forces. As I implored in version 1.0 of this thread, watch those CoT reports that come out every Friday. Every week they seem to show the leveraged speculative fervor against the CAD$ to be getting stronger and stronger. Thus leading to the body of evidence that the recent fall in the CAD$ is not fundamentally driven, but is rather based on traders desperately making large directional bets.

A potential conclusion to come to, is that the overseas speculators have gone to bed, while its the domestic/US speculators who are pounding away at the CAD$ (and gold).
TodayHello wrote: ...The Banks are smarter than you - they have floors full of people whose job it is to read Mark77 posts...
Banned
User avatar
Feb 15, 2008
26318 posts
3217 upvotes
Calgary
Australia dollar starting to pick up finally. Might a more meaningful turnaround in the CAD/USD pair be around the corner? Past week or two have been awfully stable. So much for the whole idea that we were going back to 80 cents or whatever the gloom and doomers were claiming, based on some ill-thought out idea of 'fundamentals' (or worse, relying upon fundamentally flawed things like hamburger prices!).
TodayHello wrote: ...The Banks are smarter than you - they have floors full of people whose job it is to read Mark77 posts...
Newbie
Oct 15, 2009
87 posts
43 upvotes
Kanata
Most of the discussion centres around short term CAD/USD. Personally I'm more interested in the long term. Short term forex trading seems far too speculative for me.

My exposure to USD is primarily USD $ US domiciled ETFs e.g VTI. I have no clue where the dollar is going short term. Long run, I suspect CAD will trade at par, or slightly below.

I've opted to buy US stocks and ETFS when the dollar is at or above par, and then switch to buying CAD currency hedged ETFS that track the same underlying index when dollar drops. Then when/if? (difficult to guess short term) the dollar goes close back to par, sell the C$ etfs and rebuy the USD counterpart. The currency hedging has a small cost, but done in the short term to avoid buying when the dollar trades well below par.

One of my main concerns is a home country bias in my portfolio so buying US companies is important to me. If anyone has other strategies to lower currency risk, please share.
Banned
User avatar
Feb 15, 2008
26318 posts
3217 upvotes
Calgary
badcoffee wrote: Most of the discussion centres around short term CAD/USD. Personally I'm more interested in the long term. Short term forex trading seems far too speculative for me.
I've given a view of where the CAD/USD$ pair is going in the long term. Dramatically higher for the CAD$ as the US forced into a devaluation to correct the long-term trade imbalances that exist between it and the rest of the world. And as Canada's consumer debt starts to slow and even contract.

One of my main concerns is a home country bias in my portfolio so buying US companies is important to me. If anyone has other strategies to lower currency risk, please share.
There's a whole world of investing outside of just Canada and the United States. You can buy an Intel, or you can buy a Taiwan Semiconductor Manufacturing Company. Both are undisputed leaders in their industry. The current freak-out in the emerging markets is an excellent opportunity to acquire equity on the cheap.
TodayHello wrote: ...The Banks are smarter than you - they have floors full of people whose job it is to read Mark77 posts...
Banned
User avatar
Feb 15, 2008
26318 posts
3217 upvotes
Calgary
New CoT report out today:

Code: Select all

Traders in Financial Futures - Futures Only Positions as of February 4, 2014                
-----------------------------------------------------------------------------------------------------------------------------------------------------------
              Dealer            :           Asset Manager/       :            Leveraged           :              Other             :     Nonreportable    :
           Intermediary         :           Institutional        :              Funds             :           Reportables          :       Positions      :
    Long  :   Short  : Spreading:    Long  :   Short  : Spreading:    Long  :   Short  : Spreading:    Long  :   Short  : Spreading:    Long  :   Short   :
-----------------------------------------------------------------------------------------------------------------------------------------------------------
CANADIAN DOLLAR - CHICAGO MERCANTILE EXCHANGE   (CONTRACTS OF CAD 100,000)                          
CFTC Code #090741                                                    Open Interest is   160,625
Positions
    88,324      1,745        693     14,477     17,085        691     12,844     87,651      4,830     13,458      3,670        214     25,094     44,046
 
Changes from:       January 28, 2014                                 Total Change is:     3,411
     4,758        226       -371      1,644        321       -130        900        968        108        328        543       -421     -3,405      2,167
 
Percent of Open Interest Represented by Each Category of Trader
      55.0        1.1        0.4        9.0       10.6        0.4        8.0       54.6        3.0        8.4        2.3        0.1       15.6       27.4
 
Number of Traders in Each Category                                    Total Traders:        95
        14          4          5          4          8          .         16         33         11         11          5          5
Leveraged speculator sentiment ("dumb money") is starting to turn a little, with a roughly equal number of contracts on the long and short added to the pair. Which is quite in contrast with the increasing bearishness towards the CAD$ that we saw in the past few reports.

Asset manager (aka "smart money") is turning extremely bullish on the CAD$. These are the people who actually use currency, not a bunch of grown men playing speculator games on their computers.

With $100 oil (the highest on this day in history Zerohedge tells me!) and an economy that isn't falling off the cliff despite a significant slowdown in the RE industry, it is no surprise that the speculators are at least starting to realize that the long term value of the CAD$ is considerably higher than currently depressed levels.
TodayHello wrote: ...The Banks are smarter than you - they have floors full of people whose job it is to read Mark77 posts...
Deal Addict
May 17, 2013
1775 posts
279 upvotes
As mentioned in the old thread that got deleted because a certain troll resorted to racist terminology, it was mentioned that you should not rely only on the CoT report to do forex speculation because only the real 'dumb money' does that.
Banned
User avatar
Feb 15, 2008
26318 posts
3217 upvotes
Calgary
sunshinemoonlight13 wrote: As mentioned in the old thread that got deleted because a certain troll resorted to racist terminology, it was mentioned that you should not rely only on the CoT report to do forex speculation.
There was no racist terminology in any prior thread, and you're certainly entitled to your belief as to the CoT reports, but clearly it shows that there is a significant amount of bullishness on the part of people who actually use the currency, as opposed to people who just speculate, long or short, in it.
TodayHello wrote: ...The Banks are smarter than you - they have floors full of people whose job it is to read Mark77 posts...
Deal Fanatic
May 1, 2012
9371 posts
8221 upvotes
Markham
sunshinemoonlight13 wrote: As mentioned in the old thread that got deleted because a certain troll resorted to racist terminology, it was mentioned that you should not rely only on the CoT report to do forex speculation because only the real 'dumb money' does that.
I cannot believe that the mods don't ban people that often spread racist remarks. In fact, I remember this same troll (you mentioned) giving out extremely damaging opinions to people on this forum who are simply out for some help. A few things I remember:

1) telling users to change motor oil in their car ever 5 year
2) telling a user to apply for a 25 year TERM mortgage (man that is stupid)
3) every stock buying advice

Top