Bank of America Says Bet on Loonie Drop Versus Swiss Franc
By Chris Fournier
Jan. 5 (Bloomberg) — Bank of America Corp. recommended that investors bet that the Canadian dollar will weaken against the Swiss franc as the commodity boom falters.
“The Canadian dollar will likely be an underperformer among Group of 10 currencies in the weeks ahead,” Bank of America currency strategists David Powell in London and John Rothfield in San Francisco wrote in a note to clients. “The declining stimulus from the energy sector has just started to show up in Canadian economic figures.”
The Canadian dollar will weaken to 0.8501 franc from 0.9339 franc today, according to the analysts. They recommend “establishing short exposure” at 93.40.
The Swiss franc has “consistently appreciated” when Group of Seven economies cool, meaning the currency will likely outperform its peers in 2009, Powell and Rothfield wrote. The currency was one of only three among the 16 most actively traded to strengthen against the U.S. dollar last year, gaining 6.1 percent.
Crude oil, the largest component of the Bank of Canada’s Commodity Price Index, accounting for a fifth, dropped 54 percent last year. Crude for February delivery rose $2.12 to $48.46 today.
The Reuters/Jefferies CRB Index of 19 commodities slumped 36 percent last year, the most in five decades.
To contact the reporter on this story: Chris Fournier in Montreal atcfournier3@bloomberg.net
Last Updated: January 5, 2009 16:32 EST