FXStreet (Delhi) – Charles St-Arnaud, Research Analyst at Nomura, suggests that with USD/CAD slightly overvalued, further increase seems limited in the pair.
Key Quotes
“The Canadian dollar has depreciated significantly in recent weeks. Most of the depreciation can be linked to the further decline in oil prices and, to a lesser extent, to an increased probability of a rate cut by the BoC. Using our valuation model for USD/CAD, we estimate that USD/CAD should be closer to 1.35, given current commodity prices and rates differential.”
“We also find that commodity prices would need to decline by another 20% for USD/CAD fair value to increase above 1.40. This suggests that, unless commodities prices continue to decline, further increases in USD/CAD are likely to be limited at this point, unless the Canadian economy falters.”
(Market News Provided by FXstreet)