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Canadian dollar sellers ease ahead of the Bank of Canada decision

BNY said the two-month rolling flow average for CAD remains near -1.5, a level linked to severe risk aversion, so any rebound may be selective.

Reported · Written up by our desk · Major Pairs

BNY’s Geoff Yu said selling pressure on the Canadian dollar has eased ahead of the Bank of Canada’s decision, allowing lighter aggregate CAD purchases after a prolonged period of outflows.

Yu pointed to data showing USD/CAD selling by CAD-based investors has driven much of the improvement, as CAD-based holders appear to have stopped adding USD exposure following extreme inflows in late June.

Even with the near-term stabilization, the note warned that domestic selling and weak Canadian asset flows still cap upside for CAD, keeping the case for exposure limited to a selective approach.

The analysis added that CAD’s two-month rolling flow average remains extremely weak at close to -1.5, which is typically associated with severe risk aversion, and left open whether the flow turnaround can become more durable.

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