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Canada's net foreign debt reduced by $98.1 billion

Staff writer |
Canada's net foreign debt was reduced by $98.1 billion in the fourth quarter, edging Canada into a net asset position of $26.7 billion. Over the course of 2013, Canada's overall net international investment position increased by $328.8 billion, despite an ongoing current account deficit.

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The decline was attributable to relatively stronger foreign equity markets and a weaker Canadian dollar, which raised the value of Canada's international assets more than it increased the value of its international liabilities.

Geographically, Canada's net foreign indebtedness with the United States decreased by $176.4 billion to $280 billion at the end of 2013. At the same time, Canada's net asset position with the aggregate "other countries" increased by $152.4 billion to $306.7 billion.

Canada's international assets increased by $239.6 billion to $2,911.5 billion by the end of the fourth quarter. This was the result of gains associated with the strong performance of foreign stock markets as well the weaker Canadian dollar's upward revaluation effect on foreign currency denominated international assets.

Over the quarter, the Canadian dollar lost 3.1% against the U.S. dollar, 5.4% against the British pound and 4.9% against the euro but gained 3.7% against the Japanese yen. During the same period, the US Standard and Poor's 500 stock market index increased by 9.9%.

For their part, Canada's international liabilities increased by $141.5 billion in the fourth quarter to $2,884.8 billion, largely as a result of gains in Canadian stock prices. Inflows of funds from abroad to finance the ongoing current account deficit and the upward revaluation of selected liabilities denominated in foreign currencies added to the overall increase in Canadian international liabilities.

Canada's net liability on cross-border holdings of securities declined for a fifth straight quarter, reaching $229.5 billion. The increase in Canadian holdings of foreign securities was led by the strong performance on foreign equity markets. The gains in non-resident holdings of Canadian liabilities were less pronounced and mainly resulted from higher Canadian stock prices.

Canada's net asset position on cross-border direct investment increased by $54.5 billion to $170.9 billion at the end of the fourth quarter. Canadian direct investment abroad increased by $95.7 billion to $1,222.6 billion. Higher foreign equity prices were the largest contributor to this change.

Generally stronger foreign currencies relative to the Canadian dollar also supported asset growth in the quarter, as a result of the upward revaluation of these assets. On the other side of the ledger, the value of foreign direct investment in Canada was up $41.2 billion to $1,051.6 billion. This reflected the appreciation of Canadian equity prices on non-resident assets, as well as direct investment inflows from abroad of $10.4 billion in the quarter.

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