Photo by Neil Kremer
The Canadian dollar edged higher against U.S. currency on Tuesday afternoon as oil prices trimmed losses due to unrest in Libya and concern of wider supply disruptions. The commodity-linked currency — which often reacts to oil prices because of the country’s large oil exports — rose to C$0.9707 to the U.S. dollar, or $1.0302, up slightly from its overnight high of C$0.9711. It remained locked in the broad range between C$0.97 and C$0.98 that it has been in for more than a week.
Getting over the hurdle
John Curran, senior vice-president at CanadianForex, commented on the current situation: “With oil up here, people are happy to maintain their long Canadian positions.”
According to analysts, even though the Canadian dollar’s relationship with crude oil prices is complex and unstable, overall, the currency seems to be evolving into a “petrocurrency” and the link could become even stronger as Canada expands its oil production in coming years by further oilsands exploitation.
However, there are some major risks involved with “petrocurrency”. If crude prices fall from the 2-1/2 year highs that have been fueled by turmoil in Libya and worries of oil disruption, the currency might face a major slide within a short time.
