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(Bloomberg) – Already one of the top performing major currencies this year, the Canadian dollar looks set to become a market darling for all of 2021.
At the heart of the loonie’s vast gains are demand for the country’s abundant natural resources, attractive yields, and proximity to the United States, where vaccine deployments and infrastructure spending are helping the country’s largest export market. Canada to regain a foothold.
Against this backdrop of reflation and trading and the relative calm of equity markets, the Bank of Canada has signaled that it will slow quantitative easing. This fueled the currency’s largest quarterly return in years against two safe-haven counterparts: the yen and the Swiss franc. Even against the dollar, which has defied gloomy forecasts to release its best quarter in a year, the loonie has risen more than 1%, and it is just behind the British pound for the title of best major currency so far this year.
“The Canadian recovery will be impressive in the second half of the year, with upward revised growth forecasts,” said John Velis, strategist at BNY Mellon, which is long in the loonie against the dollar. “Also, the global reopening will help commodities as we move through the year and we’ll see that commodity and oil currencies do well.”