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Marc Pinsonneault, senior economist at National Bank Financial, suggests that the Canadian dollar isn't just being supported by Canada's relatively strong financial position, its abundant supply of commodities and the prospect for interest rate hikes in the near future. The other support? Foreign investors' love of Canadian securities.

In January, investors bought a net $11.8-billion worth of homegrown securities, mostly bonds. At the same time, Canadians ditched a net $5.8-billion worth of foreign securities. Meanwhile, over the past 12 months, foreign investors have bought a net $111.7-billion of Canadian securities, more than three-quarters of this amount in bonds.



"Canadians' attitude towards foreign securities has been neutral over the past year, with practically no net purchases of foreign securities," Mr. Pinsonneault said in a note. "This development continues to play an important role in support of the Canadian dollar."

You do have to wonder, though, how much of this trend is self-reinforcing. The Canadian dollar is strong, so investors plow money into Canadian securities, which makes the dollar even stronger. Presumably, this trend can go in reverse, too.

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