Looney for the Loonie: Canada's Commodity Currency

by Mike Kapsch

There's no doubt about it...

Over the last 10 years (and more) the place for investors to be has been the commodities market.

Since August 2002:

  • Gold prices skyrocketed over 400%.
  • Silver popped 666%.
  • Oil prices jumped 265%.

Meanwhile, the S&P 500 ticked up 50%.

And it seems, despite a setback caused by the 2008 financial crisis, the bull market in commodities could have legs for years to come.

Legendary investor Jim Rogers agrees.

He told Business Times just a few days ago, "This bull market in commodities has been going on for 13 years, which is a long time, but I still don't see a major supply. Until supply starts coming in a big way, you're not going to have the end of the bull market."

In fact, in the past 200 years, the average length of commodity bull markets lasted anywhere from 17 to 22 years. One even ran up for 40 years straight.

war chart

It’s good news looking forward for commodity investors. But it's also a plus for an often-overlooked currency, as well.

I’m talking about the Canadian dollar.

A Very Happy Birthday

Earlier this year, the Canadian dollar - otherwise called the "loonie" - turned 25 years old.

And in just the last 10 years, the value of it has soared against the U.S. dollar.

In 2002, you could buy one Canadian dollar for US$0.62. Today, the Canadian dollar is trading at parity with the U.S. dollar.

And like commodities, its run likely isn't over yet.

You see, many Americans don't even realize it, but Canada is our largest trading partner.

Last year, the United States imported $316 billion worth of goods from Canada, a 14% increase from 2010.

And Canada is the largest exporter of oil and second-largest exporter of gold to the United States, as well.

So if you're bullish on the value of these commodities, especially oil prices, the Canadian dollar should be a no-brainer investment, too.

But for Canada, it gets even better.

That's because it's also in a position to dramatically increase its exports to emerging markets, particularly to countries like China.

This could end up being a huge boost for Canada and it should bolster the Canadian dollar even further against the U.S. dollar.

So where can you get started?

Three Ways to Play the Loonie

For investors, there are a number of ways to invest in the Canadian dollar.

First, the forex market is the best way to directly expose yourself to a rising Canadian dollar against the U.S. dollar.

Another way could be by picking up shares of an ETF such as Rydex CurrencyShares Canadian Dollar ETF (NYSE: FXC).

And a third option is going to be available soon, as well.

IShares just announced it's going to be launching a group of actively managed currency ETFs soon that would give investors the chance to capitalize on a number of global currency movements, including the Canadian dollar.

No matter which way you invest, if commodity prices are set to head higher, you can bet the Canadian dollar is going to follow suit.

Good Investing,

Mike

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