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Canadian Dollar Weakens As Foreign Investors Dump Securities

August 19, 2019 at 16:03 by Andrew Moran

Canadian 100-dollar billsThe Canadian dollar is sliding against major currency rivals to start the trading week. The loonie’s performance on Monday is being driven primarily by the decline in foreign acquisitions of Canadian investments. Aside from that, there is very little news and economic data coming out of Ottawa, prompting traders to rely on the status quo of the Canadian economy, which is bearish.

According to Statistics Canada, foreign investors sold $4 billion of Canadian securities in June, down from the increased revision of $10.3 billion in May.

The same report also found that foreign holdings of Canadian bonds tumbled $5.1 billion as non-Canadians slashed their holdings of government bonds. But foreign investors increased their holdings of corporate bonds.

It has been an up and down year for Canadian foreign stock investment, kicking off the year with a $28 billion spike, but then sliding just under $13 billion to start the second quarter of 2019.

That said, the statistics agency did find that foreign securities purchases by Canadian investors swelled $6.6 billion in June, up from $4.12 billion in the previous month. It seems everyone is bearish on Canadian markets.

What is happening? For one, the Canadian economy is stagnating, particularly as energy prices fail to deliver any significant momentum. Crude oil is one of Canada’s biggest exports and prices have fallen about 12% in the last three months, hurting the resource-rich country.

The second issue is that the central bank does not appear as keen – yet – to slash interest rates. The Bank of Canada did note that it is not moving on monetary policy until after the federal election. This bucks the international trend with many major central banks pulling the trigger on monetary easing: the US, New Zealand, India, and China are lowering rates.

The USD/CAD currency pair rose 0.29% to 1.3308, from an opening of 1.3276, at 15:59 GMT on Monday. The EUR/CAD advanced 0.33% to 1.4765, from an opening of 1.4713.

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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