Forex Flash: CAD amongst safest commodity bloc plays – Westpac

The CAD tends to outperform both AUD and NZD during periods of high volatility and risk. According to Jonathan Cavenagh, an Analyst at Westpac, "We suspect this could reflect a few factors - the first is related to the point above, whereby the market may be wary of end to the 'risk on' trend in markets and therefore less comfortable with going long 'high beta' currencies like the AUD and NZD."

The other factor at play could be 'catch up' from the perspective that CAD lagged the rally in AUD, NZD as the risk aversion index fell and is now playing catch up. "All up this argues that owning CAD may be the better play in the period ahead, as historically it has outperformed AUD and NZD when our risk aversion index approaches low levels." he adds. In addition, long CAD will tend to fair better in a relative sense to AUD and NZD if the recent trend reverses quickly.