After a rather gloomy start of the year for the loonie as investors returned to the U.S. as its economy picked up in the two moths of 2010, the Canadian dollar is once again making its way towards parity with its U.S. counterpart, as commodities and stocks continue to push its rates up.
The Federal Reserve announced today that interest rates in the U.S. will remain on its record low for the following months, causing an exodus of capital from the U.S. towards riskier markets, specially commodity producer countries, and the Canada is one of them. Commodities account for more than half of Canadian export revenues and the increased demand for raw materials is setting the loonie to post a new rally that may reach parity with its U.S. counterpart in the following months.
The Canadian dollar, as well as other commodity producer currencies like the Aussie dollar and the South African rand, are likely to benefit from renewed demand for commodities globally, and as long as interest rates aren’t raise in the U.S. and the EU, the loonie has good odds to rank among the best performers in currency markets in 2010.
USD/CAD traded at 1.0135 as of 00:25 GMT from a previous intraday rate of 1.0195.
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