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    AUD/CAD at Six-Month Highs, Is It Time to Get Some Loonie?

    Updated: Feb 07, 2021  

    Among the FX majors, the Australian dollar and Canadian dollar are considered the most important ‘commodity currencies’, which is to say that the fortunes of each are heavily influenced by changes in the price of commodities or by their respective nation’s ability to sell them.

    Canada is the world’s sixth-largest oil producer, with oil making up approximately one-quarter of the country’s exports. Between June-14 and February-16, when the price of WTI oil declined from $107 to $26, the CAD/USD exchange rate declined from 0.943 to around 0.685 – a 27% fall.

    Australia is the world’s second largest producer of iron ore, which means that its income is extremely sensitive to changes in the price of the commodity, and to China’s demand for it. Since mid-March of this year, the NYMEX futures price of iron ore has fallen from $89 to between $66 and $69 per metric ton. Until a small recovery in recent days, the Australian dollar had fallen seemingly in line with iron ore, from around 0.765 to lows beneath 0.745 against the US dollar, and from around 0.714 to 0.685 against the euro.

     

    AUD Surging Against CAD

    Although both of the two most commodity-driven currencies have struggled in recent weeks, in a battle between them there has only been one winner.

    Since April-12, the Australian dollar has surged against its Canadian counterpart colloquially known as the Loonie, from lows around 0.9925 to highs of 1.0345 yesterday – a new six-month high in the exchange rate. Crucially, AUD/CAD managed to take out March’s high at 1.0333 and will now target the big one – last November’s high just shy of 1.04. A move above 1.04 would take the pair to four-year highs.

    The Loonie has, of course, been falling heavily against most currencies in the wake of new US duties on Canadian imports and rumours of the potential breakup or renegotiation of NAFTA.

    Against the New Zealand dollar – another currency influenced by commodities markets, although to a lesser extent – the Canadian dollar fell yesterday to two-month lows. In early trade on Wednesday, NZD/CAD has rallied above 0.955, having been only 0.917 in mid-April.

    NZD/CAD now targets 0.96 – a price that holders of New Zealand dollars will be desperate for it to stay above. The NZD/CAD exchange rate tried to rally above the 0.96 level in November, January and in early and late-February, but on each occasion was thrust back.

     

    An Opportunity to Change Your Money

    For those in Australia and New Zealand who perhaps had plans for changing money into Canadian dollars later in the year, you might consider doing that earlier. The Canadian dollar has offered itself up for sale in recent weeks, and while one could argue that the currency could weaken further still, breaking the 1.04 and 0.96 levels in AUD/CAD and NZD/CAD will be no easy feats. Furthermore, in the coming weeks, if developments surrounding NAFTA appear a little more optimistic for Canada, we could see the Canadian dollar making up some of the ground it has lost.

    BestExchangeRates.com’s comparison calculators offer the easiest way to find the cheapest provider of foreign exchange services, including those for CAD travel money and CAD foreign currency transfers.

     
    Posted under: #News #AUD #CAD #NZD

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