Canada's dollar isn't as attractive relative to the U.S. dollar as it was last year, said Bill Gross, chief investment officer at Pacific Investment Management Co. in Newport Beach, California.
"The U.S. dollar strengthened against the loonie to some extent and it was a different story about five per cent ago in terms of price. I think some of
the momentum has changed," said Mr. Gross, the world's biggest bond fund manager, in an interview with Report on Business Television.
Even so, Mr. Gross suggested the loonie will maintain gains made in recent years since touching an all-time low of 61.75 cents (U.S.) in January 2002.
"Based on interest rates, and based on purchasing power parity... the
Canadian dollar is still reasonably priced and probably won't suffer further
erosion from this point forward," Mr. Gross said.
In terms of where to hold money on the yield curve, Mr. Gross said short-term rates in the U.S. and Canada are becoming attractive relative to the
"artificially" low rates in longer-dated securities. This week, the U.S.
Federal Reserve raised its target for overnight loans between banks by a
quarter of a percentage point to 2.5 per cent, hitting parity with the Bank
of Canada's comparable rate for the first time since April, 2001.
If the Fed lifts its target to 3 per cent, "that's high enough to basically
move money out of five- and 10-year Treasuries, whether it be in the U.S. or Canada," Mr. Gross said.
Theresa Ebden. (Theresa Ebden is an Associate Producer at Report on
Business Television and a contributing writer to The Globe and Mail)
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