Posthaste: How a weak Canadian dollar — and weak greenback — is helping the TSX

Currency moves amid Donald Trump’s tariff war are aligning to actually boost Canada’s stock market, according to a CIBC analyst.

The U.S. dollar has been on a slide this year, partly because of the darkening outlook for the American economy but also, according to analyst Ian de Verteuil, because there is a sense that Trump wants to see a weaker U.S. dollar.

“This dovetails with speculation by incoming White House officials of a ‘Mar-a-Lago Accord’ to deliberately weaken U.S. exchange rates,” he wrote in a recent note.

Another twist is that the Canadian dollar is weak at the same time.

Canada’s main stock exchange has been outperforming the S&P/500 since the start of the year and “the net effect of currency changes has been, and should continue to be, beneficial for the S&P/TSX,” said de Verteuil.

Gold is a big reason why.

When the U.S. dollar falls, gold prices typically rise. In fact, this has happened 77 per cent of the time over the past 47 years, according to CIBC tracking.

The U.S. dollar slumped 2.3 per cent in the first week of March, and gold last week broke through US$3,000 an ounce for the first time.

“The reality is that the Canadian index has become the “home” for gold companies, whether they be explorers, producers or the royalty companies – and regardless of the location of their mines,” de Verteuil wrote, adding that gold stocks currently make up almost 10 per cent of the index’s market capitalization.

“A weaker U.S. dollar has helped support gold prices and a large proportion of the S&P/TSX market cap.”

Another reason is that the TSX as the main exchange of a trading nation is global in nature, with a fair proportion of revenues coming from outside the country.  Only 48 per cent of revenues on the index