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Politics : RAMTRONIAN's Cache Inn
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To: jimtracker1 who wrote (10839)8/30/2005 1:24:15 PM
From: Harvey Allen  Read Replies (1) of 14464
 
This writer thinks Canada is a pretty good bet.

So taking a look at this from a net oil exporter/importer perspective, the currency pair that should be impacted the most by changes in energy prices is the Canadian dollar and the Japanese yen (CADJPY).

Why CADJPY?

There are many reasons why CADJPY should be on the top of list of currencies to trade for those who have a view on oil prices. There is a clear relationship between both of these instruments. Since the beginning of 2004, oil prices and the Canadian dollar/Japanese yen currency pair have had an 87% positive correlation. In fact, for the most part, oil even acts as a leading indicator for CADJPY. This relationship stems from the basic characteristics of each of these countries.

Canada is the world's ninth largest crude oil producer and they continue to climb up the list with production in oil sands increasing regularly. In 2000, Canada surpassed Saudi Arabia as the US's most significant oil supplier. Unbeknownst to many, the size of Canadian oil reserves is second only to Saudi Arabia. The geographical proximity between the US and Canada as well as the growing political uncertainty in the Middle East and South America makes Canada one of the more desirable places for the US to import oil from.


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