Canadian Portfolio Capital Data Also Misleading

August 18, 2008

Canada reported securities transactions today covering June.  There was a whopping net inflow of C$ 16.75 billion, as foreigners bought C$ 7.25 billion of net Canadian securities, while Canadians sold C$ 9.50 billion of foreign securities.  The net inflow of C$ 8.25 billion per month in 2H08 was nearly four times greater than the average monthly inflow in 1Q08, and the net flow swung from an outflow of C$ 7.72 billion per month in 1H08 to an inflow of C$ 5.21 billion in 1H08.  The increasing strength of these inflows was consistent with a 12.8% appreciation of the Canadian dollar from an average value of 1.1349 against its U.S. counterpart in 1H07 to C$ 1.0064 in 1H08.  However, consistency breaks down when one tries to relate reported capital flows to the Canadian dollar’s 1.6% weaker average value in June than May.  Likewise, there is no hint in these figures of the 7.4% drop from the Canadian dollar’s June high of C$ 0.9930 to its low so far this month of C$ 1.0728.



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