Canada Seen Rebounding as Currency of Choice in Harper Mandate

http://www.bloomberg.com/news/2011-...-as-currency-of-choice-in-harper-mandate.html


"After the Conservative Party won the first majority in the Ottawa-based House of Commons in seven years, Harper vowed to fulfill his pledge to eliminate the budget deficit by 2014 and cut corporate taxes and spending. "

“The election of a government with a pro-business agenda is good for risk assets such as the currency, stocks and bond spreads,” said Ed Devlin, a London-based portfolio manager at Pacific Investment Management Co., manager of the world’s largest bond fund. The currency will be well-supported by its economy, Devlin said, citing “fundamental strengths to Canada relative to the rest of the G-7.”

"Societe Generale and ING anticipate the currency strengthening to 92 cents to the U.S. dollar by year-end, from 95.24 cents yesterday, Bloomberg data show. Strategists are struggling to keep up with the so-called loonie’s gains, boosting their median year-end estimate to 97 cents from $1.01 in January. "

"The victory by Harper, 52, came three weeks after the International Monetary Fund predicted the world’s 10th largest economy will expand 2.8 percent this year, while inflation will end the year near the Bank of Canada’s 2 percent target. An average unemployment rate of 7.6 percent will be bettered only by Japan and Germany in 2011."

Certainty in policy making may also set Canada apart, said Geoffrey Yu, a currency strategist at UBS AG in London. The U.K. and Germany are run by coalition governments, French President Nicolas Sarkozy and Japan’s Prime Minister Naoto Kan have become unpopular with their electorates, while in the U.S., Democratic President Barack Obama must negotiate with a Republican-run House of Representatives.

“Canada is now one of the few G-7 economies which will enjoy a stable, majority government which is not at risk of being deadlocked or even brought down, either by coalition friction or constitutional separation,” said Yu. “This will allow the Canadian dollar to enjoy a strong political premium and outperform.”

"Canada’s status as the G-7’s only major exporter of commodities gives it another advantage,..."

Finance Minister Jim Flaherty called Canada an energy “superpower” in a Dec. 9 speech in New York, noting the country is the world’s second-largest producer of nickel and third-largest producer of aluminum and natural gas.

“Canada is a poster-child for the rest of the G-7,” said Jim O’Neill, chairman of Goldman Sachs Asset Management in London, who remembers lamenting the state of the economy when he entered banking three decades ago. “They have commodities, links to growth-driving economies such as China and very solid policies and governance. It’s hard to pinpoint what its immediate challenge is.”

 

Harper is a good, competent guy; major kudos to his victory. Now if only the GOP could find someone similar, we'd be in good shape for 2012.