For Loonie Bears, Oil Slump Has Come at Just the Right Time
- Newly-hawkish Bank of Canada being overshadowed by crude rout
- Prolonged slump in oil could delay interest rate hikes
It May Be Time to Go Bottom-Fishing in Canadian Equities
Slumping crude prices appear set to cut short the loonie’s best run this year. That’s music to the ears of hedge funds that are still near the most bearish on the Canadian dollar in over two decades.
The currency’s rally, fueled in part by surprisingly hawkish comments from central bank officials this month, is on the cusp of stalling as crude prices plunge. The currency weakened 0.4 percent last week, after a six-week, 4.1 percent rally that was its strongest since late last year. Historically, the oil-sensitive currency has been more correlated to crude than monetary policy amid commodity routs. With grim prospects for when oil might climb out of its downtrend, the loonie looks poised to extend its slump as one of the worst performing major currencies into next quarter.