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UBS Analyst: Loonie Near Fair Value

by: FP Trading Desk October 14, 2008 | about stocks: CUD    

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The Canadian dollar is currently sitting close to fair value relative to the recent drop in commodity prices, Garry Cooper, a strategist at UBS said.

He said the UBS’s trade-weighted basket of commodities pointed to a fair value in the $0.87 to $0.88 range. The Canadian dollar was trading at $0.86.5 on Tuesday at 1:00 pm ET.

Mr. Cooper said:

The Canadian dollar has had a 0.96 correlation to UBS’s basket of commodity  prices since 1996. Our fair value estimate is updated to include $84 oil, $7.35 natural gas, $830 gold and $2.50 copper, among others.

He said Canada’s strong economic fundamentals have helped to prevent the Canadian dollar plummeting further amid recent risk averse trades.

He said:

By way of contrast, the Australian dollar plunged by C$0.30 from its C$0.96 level last summer, and is well below that suggested by its currency basket. Accordingly, they were subject to the wave of risk aversion that gripped markets in addition to the direct impact from commodity prices, while the Canadian dollar was not.

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This article has 1 comment:

  •  
    Oct 16 03:34 AM
    The tendency is to overshoot. Don't you have any other analysts that you can quote?

    As of today, he is way off on 3 out of the 4 mentioned above. Anyone following his advice will have already started hemorrhaging, Especially the futures traders.

    Fair Value is in the eyes of the Beholder, Oil at $60, Loonie at .80, Nat.Gas at $6 would be fair value to me but in this Market, what is Fair is moot.

    Gold is still up for grabs.
    Reply
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