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A Canadian dollar, or loonie, sits on top of its American counterpart in Toronto on Sept. 20, 2007.
A Canadian dollar, or loonie, sits on top of its American counterpart in Toronto on Sept. 20, 2007.
(THE CANADIAN PRESS)

This dollar bull rally has no horns

A bullish reversal in the Canadian dollar certainly has important implications for Canada’s exports, for inflation and for the Bank of Canada’s policy path. If, of course, we had such a bullish turn.

We haven’t. Not yet, anyway.

The Canadian currency raised these concerns after topping 94 cents (U.S.) last week for the first time in six months, up more than 2.5 cents in a month and more than five cents since mid-March. This week, news that speculative traders in the currency futures market had moved to a (small) net long position in the loonie for the first time since early 2013 – that is, more speculators hold futures contracts predicting that the dollar will go up than those with contracts betting it will go down – has raised talk that market sentiment has turned, signalling the beginning of a march upward in the currency.