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Morning Business Briefing

Speculative bets against Canadian dollar mount Add to ...

These are stories Report on Business is following Monday, April 22, 2013.

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Speculative bets against loonie climb
Currency speculators are betting heavily against the Canadian dollar.

The latest numbers from the U.S. Commodities Futures Trading Commission show the value of the short positions against the loonie, as the Canadian dollar coin is known, have jumped $400-million (U.S.) to $7.4-billion.

That reading, released Friday but marking the levels of last Tuesday, show an increasingly bearish view of the currency among non-commercial, or speculative, interests.

And among some observers, it’s an odd development.

“To be very frank, it’s slightly strange,” said Sébastien Galy of Société Générale in New York.

While there are concerns about the state of the Canadian housing market, and record levels of consumer debt, the economic fundamentals and the outlook for the U.S. economy don’t support such a dim view while other commodity-based currencies are looking brighter.

“Relative to history, the CAD, GBP and JPY short positions are extreme,” said Mr. Galy, referring to the Canadian, British and Japanese currencies by their symbols.

Caterpillar cuts outlook
If you need further proof of the troubles in the mining sector, take a look at Caterpillar Inc.’s outlook today.

The company, whose first-quarter earnings report is significant for Canada because of the country’s reliance on resources and the fact that Toronto is such a home for mining finance, painted a somewhat bleaker picture, citing the mining sector in particular.

“While expectations for construction industries and power systems are similar to our previous outlook, our expectations for mining have decreased significantly,” said chief executive officer Doug Oberhelman.

“Our revised 2013 outlook reflects a sales decline of about 50 per cent from 2012 for traditional Cat machines used in mining and a decline of about 15 per cent for sales of machines from our Bucyrus acquisition.”

Caterpillar forecast revenue of between $57-billion (U.S.) and $61-billion for the year, down from the earlier range of $60-billion to $68-billion.

Its projection for earnings per share of about $7, compared to a range of $7 to $9, is based on the middle of the forecast for revenues.

In the first quarter, Caterpillar earned $880-million or $1.31 a share, compared to $1.6-billion or $2.37 a year earlier, while revenue slipped to $13.2-billion from $16-billion.

Gold price on rise
The price of gold rebounded today – it’s now sitting back above $1,400 (U.S.) an ounce – after a dramatic decline and amid tremendous uncertainty for the outlook.

“Gold continues to edge higher and once again has a $1,400 handle, but movements higher are painfully slow in comparison to the aggressive down days,” said market analyst Alastair McCaig of IG in London.

“It will take some time for either the trend or traders' sentiment to believe we are due a break from this bearish momentum.”

Several forecasters believe the run in gold is over after last week’s collapse, but others don’t, and believe it will resume its rise.

“We really need to get back into the $1,500s to say that there’s something more substantial taking place,” said Tim Riddell, the chief of ANZ Global Markets Research, according to the Reuters news agency.

“The close above $1,400 may have taken the negative pressure out of gold in the near term. A close below that level will heighten the risks of new lows.”

Air Canada heads for loss
Air Canada estimates a bigger operating loss in the first quarter, releasing preliminary results today with a view to exploring debt-financing options.

Canada’s largest air carrier expects an operating loss of $106-million compared with an operating loss of $91-million in the first quarter of 2012, The Globe and Mail's Bertrand Marotte reports.

On an adjusted basis, the airline said it anticipates a net loss for the quarter of $143-million, compared with $162-million in the year-earlier period.

The airline said it’s releasing preliminary results “pursuant to its obligations under applicable Canadian securities laws to enable it to disclose this information in meetings as it explores a range of debt financing opportunities.”

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