Investors should buy the Canadian dollar because its current decline is unlikely to last and central-bank warnings against its appreciation will probably have "limited" impact, according to Citigroup Inc.
"We believe the Canadian dollar vulnerability should prove fleeting," strategists Todd Elmer in New York and Michael Hart in London wrote in a note to clients today. "Canadian data is consistently surprising on the upside and Canada’s fiscal position is better than that of its peers."
Concerns over a weak dollar are misplaced, according to Richard Berner, Co-Head of Global Economics and Chief U.S. Economist at Morgan Stanley. In his view, "those concerns are misplaced, especially in today's context. I think a weaker dollar is a helpful adjunct to US monetary policy: It helps prevent already-declining inflation from falling too low and is a stimulant to growth for an economy that could well use more vigor"
The dollar erased its gain versus the euro after an industry report showed pending resales of U.S. homes rose in June more than forecast, reducing demand for the safety of the greenback.
The dollar was little changed at $1.4414 per euro at 10:06 a.m. in New York, after earlier gaining as much as 0.3 percent.
The dollar and yen fell against most of their major counterparts after a U.S. government report showed a third weekly reduction in the number people collecting unemployment benefits, boosting demand for higher yields.
“The dollar is under pressure as risk comes back on today,” said Gavin Friend, a markets strategist at National Australia Bank in London. “We’re not out of the woods yet when it comes to risk aversion. Tomorrow’s U.S. gross domestic product numbers will be key for giving the market some direction.”
|Weak Dollar Fears Unfounded, Economist Says|