Bloomberg News

Canada’s Currency Advances Versus Most Peers on U.S., China Data

June 14, 2011

June 14 (Bloomberg) -- Canada’s currency strengthened against the majority of its most-traded counterparts as stronger-than-forecast data in the U.S. and China added to the appeal of currencies of commodity exporters.

The Canadian dollar, sometimes known as the loonie for the image of the bird on the C$1 coin, rose to its highest in almost two weeks versus the greenback as retail sales in the U.S., Canada’s biggest trading partner, fell less than forecast and China’s industrial output increased, boosting appetite for higher-yielding assets. Stocks and commodities climbed.

“As we see better-than-expected U.S. data, which was the case today, and throw in firmer commodity prices, that provides a strong sense of support for the loonie,” said Joe Manimbo, a market analyst in Washington at Travelex Global Business Payments, a currency-exchange network. “We’re seeing people venture back into risky investments and away from the dollar, yen and Swiss franc.”

The loonie gained for a second day, appreciating 0.8 percent to 96.82 cents per U.S. dollar at 5 p.m. in Toronto, from 97.61 cents yesterday. It touched 96.75 cents, the strongest level since June 1. One Canadian dollar buys $1.0328.

Canada’s dollar last strengthened for more than a single day against the U.S. dollar in the three sessions ended May 19.

Yen, Franc

The biggest losers against the Canadian dollar were the yen and the Swiss franc, traditionally considered refuge currencies.

The loonie rose 1.1 percent to 83.13 yen, from 82.21 yen, and gained 1.8 percent against the franc to 87.31 centimes, from 85.77. It touched 83.28 yen and 87.39 centimes, both the strongest levels since June 1.

The Standard & Poor’s 500 Index gained 1.3 percent, and the MSCI World Index of stocks climbed 1.4 percent. The Thomson Reuters/Jefferies CRB Index of raw materials rose 0.7 percent. Raw materials account for about half of Canada’s exports.

Crude oil, the nation’s biggest export, advanced for the first time in three days. Crude for July delivery increased 2.2 percent to $99.42 a barrel in New York.

The currencies of Norway and Australia, fellow commodity exporters, were among the top performers versus the greenback.

“This week is really quiet in terms of Canadian data, so the Canadian dollar is really taking its cue from risk appetite,” said Kathy Lien, director of currency research at the online currency trader GFT Forex in New York.

U.S. Retail Sales

Sales at U.S. retailers fell 0.2 percent in May as slumping demand for autos and electronics overshadowed gains among Internet merchants and restaurants, Commerce Department data showed. The median forecast in a Bloomberg News survey was for a 0.5 percent drop.

“The U.S. data has been so negative recently it was a bit of a relief it was not a terrible number,” said Steve Butler, director of foreign-exchange trading in Toronto at Bank of Nova Scotia’s Scotia Capital unit.

Today’s report followed data earlier this month that showed the U.S. unemployment rate rose to 9.1 percent in May and manufacturing slowed.

Chinese industrial production increased 13.2 percent last month, more than economists forecast, and retail sales rose 16.9 percent, the statistics bureau reported. The consumer-price index gained 5.5 percent, matching economists’ median forecast in a Bloomberg survey. Lenders were ordered to set aside more cash as reserves.

Bonds Fall

Canada’s government bonds dropped, pushing the yield on the two-year benchmark up five basis points, or 0.05 percentage point, to 1.52 percent, the highest level since June 1. The 1.75 percent security due in March 2013 fell 9 cents to C$100.39. Ten-year note yields climbed as much as eight basis points to 3.08 percent, the highest since May 31.

The government will auction C$3.5 billion ($3.6 billion) of two-year notes tomorrow, according to a statement on the Bank of Canada’s website. The 2 percent securities mature in August 2013.

Canadian industrial companies’ use of their production capacity rose to the highest level in more than three years between January and March on gains in manufacturing, government figures showed.

The share of plant capacity in use rose to 79 percent in the first quarter, the highest since the end of 2007, Statistics Canada said today in Ottawa. Economists in a Bloomberg survey predicted the rate would be 77.2 percent.

--With assistance from Greg Quinn in Ottawa. Editors: Greg Storey, Paul Cox

To contact the reporter on this story: Allison Bennett in New York at abennett23@bloomberg.net

To contact the editor responsible for this story: Dave Liedtka at dliedtka@bloomberg.net


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