Canadian Dollar Falls on Trade Deficit Surprise

The Canadian dollar had its rally towards parity with its U.S. counterpart halted after a monthly trade deficit was posted today, raising doubts that the nation’s economy is not going as good as some analysts like to believe.

The loonie had a disappointing surprise today as Canada posted a trade deficit of more than $300 million while forecasts suggested a surplus of $500 million, surprising traders and affecting the outlook of one of the best performing currencies so far in the beginning of 2010. The Canadian dollar had profited so far this month from high risk aversion and an increasing demand for the nation’s commodities, which influenced the Canadian economic expectations, impacted today showing traders that Canada’s resilience is not as high as previously imagined.

Doubts regarding the overconfident Canadian economic outlook helped other currencies to pare losses versus the loonie, specially its U.S. counterpart, which jumped from the lowest rate almost 3 months versus Canada’s currency. Monthly reports can be deceiving thought, as seasonal adjustments may hide the actual economic scenario of a country, which is the case of Canada, is still above the average.

USD/CAD traded at 1.0362 as of 16:39 GMT from a previous rate of 1.0334. CAD/JPY tumbled to 87.59 from 89.09.

If you want to comment on the Canadian dollar’s recent action or have any questions regarding this currency, please, feel free to reply below.