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U.S. bank loves Canadian dollar: 'Who doesn't? That's the problem' Add to ...

These are stories Report on Business is following Wednesday, Oct. 3, 2012.

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The loonie's fortunes
Bank of New York Mellon wonders today whether the Canadian dollar might soon be a “victim of its own success.”

In a report on the loonie, as the dollar is known in Canada, senior currency strategist Neil Mellor of BNY Mellon Global Markets looks at why it’s in high demand and why it should continue as “one of the market’s favoured currencies” moving forward.

“However, here’s the rub: In the near term, the CAD looks set to be a victim of its own success,” he wrote, referring to the Canadian currency by its symbol.

“The CFTC commitment of traders report shows that there exists a speculative long position in the CAD amounting to 111,000 contracts, a record high following a steady build-up since the summer.”

Those numbers from the U.S. Commodities and Futures Commission means futures traders are betting heavily that the loonie will continue to rise.

Over the past couple of weeks, though, he said, the U.S. dollar has rebounded. To the point where momentum traders are said to be showing "some interest" in the breach of a key level on the Canadian dollar versus the greenback.

"Given that it is unclear how far this rebound could go, then it would seem entirely prudent to take to the side-lines for the time being and await the decline in momentum and a shakeout in positions that should then offer a glowing opportunity," he said.

Mr. Mellor’s report – it’s titled We love the CAD, who doesn’t? That’s the problem – notes the recent mixed signs in Canada’s economy.

Still, “Canada stands out as a beacon of economic health and that there is expected to be sufficient strength therein to oblige its central bank to raise interest rates in 2013 sets it aside from many of its peers.”

That’s important, but projections for commodities markets are more important, said Mr. Mellor, who’s based in London.

“Oil prices have been drifting higher and here too, our presumption must be for an eventual return to the 100-per-barrel marker, particularly in view of on-going tensions in the Middle East,” Mr. Mellor said, which is partly behind his view.

“It should also be pointed out that portfolio flows into Canada, as measured by BNY Mellon iFlow data, remain promising - less so on the equity side admittedly (where the picture has been relatively flat in the past few weeks), but certainly on the bond side, where the trend in inflows has remained unwaveringly positive for some time,” he added.

“It is also noticeable that CAD purchases have picked up sharply since the middle of July, a period in which commodity prices have outperformed.”

Caisse cuts Quebecor Media stake
Caisse de dépôt et placement du Québec is cutting its stake in Quebecor Media Inc. in a $1.5-billion deal unveiled this morning, The Globe and Mail’s Steve Ladurantaye reports.

The Caisse’s interest in Quebecor Media falls to 24.6 per cent from 45.3 per cent as Quebecor Media and its parent Quebecor Inc. buy some of the interest.

“Our intention was to take advantage of the window of opportunity created by the favourable conditions on the debt markets to increase our interest in Quebecor Media,” said Pierre Karl Péladeau, chief executive officer of both Quebecor Inc. and Quebecor Media.

Home prices up
The average price of a two-storey home in Canada was 4 per cent higher than a year ago in the third-quarter, at $403,747, while condos saw prices rise 1.8 per cent to $243,607, according to a Royal LePage survey.

But sales are slowing and prices are likely to follow suit, chief executive officer Phil Soper suggested, while adding that because of low interest rates the downward pressure on prices should be “minimal,” The Globe and Mail’s Tara Perkins reports.

“A drop in the number of homes trading hands typically precedes a period of softening house prices,” he said.

Apple works on smaller iPad
A smaller version of the popular iPad appears to be in the works.

Asian manufacturers of components have now begun to produce a smaller tablet for Apple Inc., The Wall Street Journal reports today, citing sources.

The iPad, now in its third iteration, has been a huge success but other companies have jumped in with smaller tablets.

The newspaper quotes sources saying the new tablet’s display will be 7.85 inches, compared to the iPad’s 9.7 inches, and will have lower resolution.

Fast slams 'free-trade deniers
Canada’s economic future is being threatened by “free-trade deniers” whose vision for the country is “timid and inward-looking,” Canada’s international trade minister said today.

“I wish I could tell you that everything looks rosy,” Ed Fast, federal minister of international trade, told a Toronto audience, The Globe and Mail's Tavia Grant reports. “Unfortunately, there are still some activists that slavishly oppose our efforts to open up new markets for Canadian entrepreneurs ... These activists are Canada’s great free-trade deniers.”

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