The relative resilience of the Canadian dollar has been somewhat surprising in the face of Europe-related market jitters ¯ the small 0.6% depreciation of USDCAD so far this year compares to the nearly 5% decline in the AUD/USD cross for example. This morning, we got some more information about the forces behind the loonie’s resilience. The C$10.3 bn deficit on the current account in the first quarter of the year was financed primarily by foreign direct investment and to a lesser extent by the more volatile portfolio flows. So the quality of inflows improved significantly in Q1. As today’s Hot Chart shows, net foreign direct investment rose to C$14.6 bn, the highest since the second quarter of last year. The energy and minerals sectors again took the lion’s share of those inflows at C$8.2 bn in Q1. Over the last four quarters, the energy/minerals sector’s share of net FDI flows has averaged an impressive 59%.
With the drop in commodity prices, the inflows in the energy/minerals sector likely softened a bit in Q2. But portfolio inflows may have picked up the slack with the general flight to safety/quality due to Europe-related market jitters. Indeed, Canada’s government bonds have never looked as good in a shrinking AAA universe.
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Canada: Healthy Foreign Direct Investment In Q1
Published 06/03/2012, 05:27 AM
Updated 05/14/2017, 06:45 AM
Canada: Healthy Foreign Direct Investment In Q1
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