The Canadian dollar is poised to rise further even if oil prices don’t, according to BCA Research.

In a research note, the independent research firm says that the loonie was an excellent petrocurrency play from 2004 to 2007, but the relationship broke down in recent months. “That said, we believe a ‘catch up’ phase is overdue,” it says.

“The Bank of Canada has stopped cutting interest rates at a time when Canadian short-term rates exceed the U.S. In addition, Canada produces and exports significant amounts of natural gas and we expect the latter to outperform crude oil over the next few quarters. Moreover, Canada offers many energy stocks with low political risk and sizable reserves (especially oil sands plays),” it says.

“A high-profile takeover (depending on method of financing) could cause the currency to surge. Finally, the country’s twin surpluses create natural demand for the dollar,” it adds.

http://www.bankcreditanalyst.com/