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CAD Extends Decline, Economy Shows No Signs of Improvement

August 31, 2010 at 22:05 by Vladimir Vyun

Canadian DollarThe Canadian dollar extended its decline for the second day as the poor macroeconomic data continues to undermine the attractiveness of the currency to the global investors. This month can be the worst for the Canadian currency since June 2009.

Canada’s gross domestic product grew 0.2 percent in June, less than some analyst predicted. The real gross domestic product grew by 0.5% in the second quarter, after increasing by 1.4% in the first quarter. The reports also showed that the current account balance and the retail sales were worse than expected. The unfavorable reports decreased the chances that the central bank will increase the interest rates.

It’s surprising how quickly the loonie turned from the well-performing currency into the weak and bearish one. We could have expected that the investors would start to sell the growth-linked currencies in favor of the safer ones with the deteriorating global economic environment, but the weakness of Canada’s economy itself was hard to predict. But, perhaps, it’s just good opportunity to buy the currency before it’ll resume its rally? That’ll be interesting to see.

USD/CAD rose from 1.0596 to 1.0653 today as of 20:05 GMT, while EUR/CAD climbed from 1.3417 to 1.3505, following the advance to 1.3563.

If you have any questions, comments, or opinions regarding the Canadian Dollar, feel free to post them using the commentary form below.

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