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How the Canadian-dollar bears scurried for cover

These are stories Report on Business is following Friday, July 4, 2014.

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Changing fortunes
A new report paints a picture of how the Canadian dollar has swung sharply, catching up exporters and sending bearish speculators scrambling to cover their bets.

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The loonie, as the country's dollar coin is known, fell in the first quarter of the year by 3.9 per cent, marking the worst showing among the world's primary currencies.

But, the Bank of Nova Scotia report shows, it rebounded 3.6 per cent in the second quarter, marking the best performance.

The report, released late yesterday by chief currency strategist Camilla Sutton and currency strategist Eric Theoret, illustrates how the loonie's wild swings caused headaches for Canadian exporters, though many hedge.

It also highlights how speculators betting against the currency were forced into "a massive round of quarter-end short-covering reminiscent of the capitulation at the end of Q1," Ms. Sutton and Mr. Theoret wrote.

The rapid moves in the loonie, the world's fifth-largest reserve currency, are also an issue for the Bank of Canada, which is counting on a pick-up in exports to help juice the recovery.

It's interesting to note, though, that after six months, the currency is just about back at where it began the year, about 94 cents U.S., compared to just above that mark in early January.

Ms. Sutton and Mr. Theoret expect it to end the year at 91 cents.

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The dollar, according to the Scotiabank strategists, was driven in the second quarter by economic signals, monetary policy from both the Bank of Canada and the Federal Reserve, higher oil prices and shifting sentiment.

It gained 0.8 per cent in April, 1.1 per cent in May and 1.5 per cent last month.

The impact on currency speculators over the course of the first six months has been dramatic.

Short positions against the loonie were running at about $5.5-billion at the end of last year, according to the U.S. Commodities Futures Trading Commission.

It stood at $6-billion in mid-March, falling markedly to $3-billion later that month. According to the latest CFTC report, which is a week old, that's now down to just $500-million.

That followed economic and monetary policy developments that forced "CAD bears to cover shorts at the fastest pace" since the end of the first quarter, the Scotiabank strategists said, referring to the loonie by its symbol.

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(See the accompanying infographic or click here.)

Home sales, prices climb
Toronto's housing market chalked up a stellar June, with both sales and prices surging from a year earlier.

Friday's report from the Toronto Real Estate Board adds to the sentiment expressed this week by the Conference Board of Canada, which said the city's residential real estate market was dinged by a harsh winter but should rebound.

Home sales in Canada's biggest city climbed 15.4 per cent in June from a year earlier, to 10,180, the Toronto board said.

The average price rose 7.4 per cent over the same period, to $568,953.

Prices for semi-detached homes came in with the strongest showing, up 9.7 per cent. Notably, the condo market, which many observers deem frothy, saw price gains of 6.8 per cent.

"Despite higher inventory levels, the condominium apartment market segment has benefitted from enough buyer interest to result in above-inflation price growth," said the group's senior manager of market analysis, Jason Mercer.

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