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Foreign demand for Canadian securities, particularly government bonds, continues to climb as investors seek safety from the ongoing stress in global financial markets.

Non-residents increased their holdings of Canadian securities by $26.1-billion in May, the biggest monthly inflow on record, Statistics Canada reported Monday. Canadian bonds attracted $16.7-billion, their largest inflow in three years, led by the record-high $15.5-billion government bonds pulled in.

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This strengthens the argument that Canada is gradually becoming a safe haven, with further evidence seen in July and November last year

“This strengthens the argument that Canada is gradually becoming a safe haven, with further evidence seen in July and November last year,” said Charles St-Arnaud, an economist at Nomura Securities.

He also pointed out that Canada’s safe-haven status and the resulting inflows explain why the loonie depreciated less than expected (about 6%) despite a sharp decline in commodity prices in May. The Canadian dollar also outperformed other commodity currencies such as the Norwegian Krone and the Australian dollar.