Tweet
http://www.bloomberg.com/apps/news?p...d=aEY9pUHMCLr8
By Sapna Maheshwari and Matt Townsend
Aug. 20 (Bloomberg) -- Goldman Sachs Group Inc. said to short the U.S. dollar against its Canadian counterpart with a robust economic recovery unlikely and rising oil prices expected to benefit the Canadian currency.
The firm recommended establishing a short position, or bet that the U.S. currency will decline, with a target price of C$1.06. The position should be closed if the Canadian dollar weakens to about C$1.11. The currency gained 0.7 percent to C$1.0877 per U.S. dollar at 2:03 p.m. in Toronto, from C$1.0953 yesterday. One Canadian dollar purchases 91.93 U.S. cents.
The U.S. dollar will remain weak as the economy does “not improve sufficiently this year for foreign investors to consider sizable” investments, according to a Goldman research note today.
[..]
The Canadian dollar has appreciated 12 percent against its U.S. counterpart so far this year. Bank of Canada Governor Mark Carney said at a July 23 conference that “the dollar is an important brake on the pace of growth right now” and that the bank “retains considerable flexibility” to use it “if necessary.” A stronger Canadian dollar squeezes exporters’ profits.
Canada’s central bank has not intervened in foreign- exchange markets to affect the dollar’s value since 1998 and Goldman is betting that will continue.
“We doubt Canada as a G-7 nation will actively intervene to directly influence the exchange rate near current levels,” the note said. The Canadian currency is overvalued by 6 percent or 7 percent, the firm wrote, which is “not excessively strong.”
By Sapna Maheshwari and Matt Townsend
Aug. 20 (Bloomberg) -- Goldman Sachs Group Inc. said to short the U.S. dollar against its Canadian counterpart with a robust economic recovery unlikely and rising oil prices expected to benefit the Canadian currency.
The firm recommended establishing a short position, or bet that the U.S. currency will decline, with a target price of C$1.06. The position should be closed if the Canadian dollar weakens to about C$1.11. The currency gained 0.7 percent to C$1.0877 per U.S. dollar at 2:03 p.m. in Toronto, from C$1.0953 yesterday. One Canadian dollar purchases 91.93 U.S. cents.
The U.S. dollar will remain weak as the economy does “not improve sufficiently this year for foreign investors to consider sizable” investments, according to a Goldman research note today.
[..]
The Canadian dollar has appreciated 12 percent against its U.S. counterpart so far this year. Bank of Canada Governor Mark Carney said at a July 23 conference that “the dollar is an important brake on the pace of growth right now” and that the bank “retains considerable flexibility” to use it “if necessary.” A stronger Canadian dollar squeezes exporters’ profits.
Canada’s central bank has not intervened in foreign- exchange markets to affect the dollar’s value since 1998 and Goldman is betting that will continue.
“We doubt Canada as a G-7 nation will actively intervene to directly influence the exchange rate near current levels,” the note said. The Canadian currency is overvalued by 6 percent or 7 percent, the firm wrote, which is “not excessively strong.”