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Impact of Keystone XL's approval on CAD to be short lived - Nomura

FXStreet (Bali) - The impact of Keystone XL's approval on CAD is likely to lead to a major spike in CAD across the board, but is likely to be short lived, notes Nomura.

Key Quotes

"Investors have been waiting anxiously for the project to be approved. A positive vote in Congress today could lead to a small decline in USD/CAD. The impact of Keystone XL's approval on CAD would be much bigger, but is likely to be short lived."

"We can envisage USD/CAD dropping one full figure and maybe more on the announcement of the approval, but then stabilise there. An approval by the President does not clear the way for the start of construction, as the project continues to face many legal challenges."

"Also, Keystone won't be operational until 2017. So the positive economic spillover effects won't be visible until then. Moreover, the impact may be gradual as new transportation capacity is likely to mainly displace oil already being shipped by rail rather than being new production and exports."

"So the net impact on exports may only be gradual, as the increased capacity to export to the US will allow the development of new production. We continue to expect USD/CAD to move higher going into the first half of 2015, reaching 1.19, mainly as a result of a stronger USD."

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