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A rising Canadian dollar hasn’t been enough to tempt foreign investors into stocks. The loonie is the top-performing currency against the U.S. dollar among its global peers this year, rising more than 4 per cent, for those attracted to a sound economy and scorching job market.

Hedge funds and other large speculators increased net Canadian dollar longs to 12,961 contracts in the week ended Oct. 15, from 5,313 the previous week, according to the Commodity Futures Trading Commission. That was the highest in about a month.

Inflows into bonds haven’t been great either. As of August, net foreign capital in the bond market stood at about US$26 billion, compared with US$40 billion last year at the same time and US$61 billion in 2017.

“We are probably going to continue to see Canadian yields rise along with Treasuries on renewed optimism that global growth concerns will be alleviated,” said Edward Moya, a senior market strategist at Oanda Corp. “The Canadian dollar is likely to remain supported against the greenback but probably not so much against its other major trading partners.”

Resources MIA

The strong correlation between foreign flows and the “resource-centric” equity performance is waning this year and that was last seen in 2007 before the global financial crisis, according to Martin Roberge, analyst at Canaccord Genuity.

“While global economic conditions do not look as dire, growth is weak and our momentum indicators are still declining,” he said in an Oct. 21 report. The firm has an underweight call on Canadian stocks and recommends getting back into the market when foreign flows near or fall into “contraction territory.”

Bloomberg.com