Commodity component

Canada and its currency continue to benefit from firmer commodity prices. Canada is a huge exporter of a variety of natural resources, including petroleum and metals (gold, copper, nickel, zinc, and uranium). Strong global demand for these raw materials has continued to support the currency. After falling below $60 per barrel in early 2007, nearby NYMEX crude oil prices had pushed back above $65 per barrel as of early June, with some analysts forecasting continued gains toward $70
this summer.

Global demand for raw materials has created a flurry of M&A within Canada, which has also supported the currency. “We are seeing huge M&A flows into Canada,” says Jamie Coleman, managing analyst at IFR Markets. “Canadian companies are being purchased
by the U.S., China, and the UK. The whole mining sector is being snapped up. There is a big grab for natural-resource producers.” When foreign investors purchase Canadian raw material companies, they need to buy Canadian dollars to conduct the transactions, which in and of itself increases demand forthe loonie.