Scotia sees 2011 gains for C$, Toronto stocks

* Scotia sees C$ at $1.04 end 2011; $1.06 end 2012

* Expects Canada’s S&P/TSX index to reach 14,000 end 2011

By Jennifer Kwan

TORONTO, Dec 7 (BestGrowthStock) – Canada’s dollar will grind
higher against the greenback in 2011 and 2012, boosted by
demand for commodities and interest rates higher than those
found in the United States, Scotiabank predicted on Tuesday.

The country’s main stock market index (.GSPTSE: ) is also
likely to rise more than 5 percent from current levels by the
end of next year as the economy recovers further, the bank said
in an economic and market outlook.

Camilla Sutton, chief currency strategist at the bank’s
Scotia Capital arm, said she expects the Canadian currency
(CAD=D4: ) to end 2010 at parity with the U.S. dollar.

Just over a year from now Sutton expects one Canadian
dollar to be worth $1.04. She forecast the currency will firm
further to $1.06 by the end of 2012.

At midday on Tuesday, Canada’s dollar (CAD=D4: ) was at
around 99.17 U.S. cents.

“Our forecast for Canada is that we are essentially at
parity and we move sustainably through parity in 2011, and
remain there in 2012,” said Sutton.

Such a move would not be unprecedented. In November 2007,
the currency rose to a modern day high around $1.10.

In addition to commodity exposure and rate differentials,
Sutton thinks Canada’s stronger fiscal stance and a weak
greenback will contribute to the gains.

The currency weakened on Tuesday after the Bank of Canada
held its key interest rate steady, as expected, and issued a
statement widely seen as dovish. [CAD/]

The central bank set the stage for rates to pause at 1
percent for some time by emphasizing its concern over weaker
exports and the risks posed by Europe’s debt woes.

All 44 forecasters surveyed by Reuters last week had
predicted no change in rates, but markets are divided on the
timing of the first increase in 2011.[CA/POLL]

Warren Jestin, chief economist of Scotiabank, predicted the
central bank will hike rates in the fourth quarter of 2011.
However, if the Canadian dollar bursts higher in a short period
— rising to anywhere between $1.04 and $1.06 — he sees a
slight risk the central bank could surprise with a rate cut.

“We don’t put that as a high-odds bet, but with the
currency volatility we’ve seen over the last couple of years it
is in the realm of possibility,” he said.

Vincent Delisle, director of portfolio strategy at Scotia
Capital, said Canada’s main stock index (.GSPTSE: ) is headed for
14,000 by the end of 2011, lifted in part by steady U.S.
economic growth.

He favors cyclical over defensive stocks in 2011. And in an
environment of low rates, he expects securities offering high
yields and dividends to “reward investors once again”.
(Editing by Jeffrey Hodgson)

Scotia sees 2011 gains for C$, Toronto stocks