Morgan Stanley & Co. advised betting the Canadian dollar will gain against the Swiss franc, saying new data shows Canada's economic slump over.
„Recent improvements in retail sales, shipments and trade reinforce our view that the Canadian economy is ready for an upward re-rating,” Sophia Drossos, a currency strategist at Morgan Stanley & Co. in New York, wrote in a note to clients yesterday. Canada's dollar reached a seven-week high of 86.25 US cents yesterday after a government report showed retail sales in December grew at the fastest pace in nine years.
At the peak yesterday, one US dollar bought C$1.1594. Canada's economy, the world's eighth-largest, expanded 0.2% in November, Statistics Canada said January 31 in a report on the gross domestic product. It was unchanged in October and contracted in September. The currency has rebounded after dropping earlier this month to 84.20 US cents, a 14-month low. Canada's dollar has gained more than 2% since then as traders pare bets the Bank of Canada will cut borrowing costs this year.
New York-based Morgan Stanley expects the Canadian dollar to appreciate to 1.09 Swiss francs, a three-month high, over the next month from the current of 1.0671 Swiss francs. „We think there is more room for unwind of the Canadian dollar shorts and prefer to maintain our long Canadian dollar position,” Drossos wrote. Shorting a currency is a bet that it will drop against its counterparts.
Drossos didn't return a phone call seeking comment. Speculators and hedge funds turned bearish on the Canadian dollar at the start of this year as the prices of Canadian commodity exports such as crude oil declined. Oil closed at $60.07 today in floor trading on the New York Mercantile Exchange, rebounding from a low of $49.90 on January 18. (Bloomberg)