Asset Allocation: Portfolio Flows - US and China shape loonie's future.

Financial Times Mandate, June, 2005

Byline: Neil Mellor

The outlook for the Canadian dollar (CAD) can, to a large extent, be drawn from that which underpins our general view of the US dollar. Assuming that a renewed outflow of capital from the US will trigger the restoration of the long-term dollar downtrend in the months ahead, the CAD should perhaps be well placed as a default beneficiary - given its status as commodity currency and the ongoing strength of the Chinese economy. That said, with global investors arguably under pressure to raise their game in the remainder of the year, the CAD - the so-called `loonie' - is not an assured winner.

If the Bank of Canada (BOC) felt confident about its 2005 GDP forecast of about 2.5 per cent, a pick up in activity from Q4 (when GDP expanded...

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