Bloomberg News

Canada Dollar Gains to Parity Before Bank of Canada Decision

October 25, 2011

Oct. 25 (Bloomberg) -- Canada’s dollar strengthened through par with the greenback on optimism European officials will forge a plan that contains the region’s debt crisis before the Bank of Canada delivers its policy decision.

The currency remained higher after Statistics Canada reported August retail sales rose more than forecast. All 27 economists surveyed by Bloomberg News predicted the Ottawa-based central bank will leave its policy rate at 1 percent, where it’s been since September 2010.

“We’re not expecting much from the Bank of Canada,” said Blake Jespersen, director of foreign exchange in Toronto at Bank of Montreal, in a telephone interview. “They’ll stick to the script. The bank will be somewhat of a non-event and Europe remains the focus.”

Canada’s currency climbed as much as 0.5 percent to 99.91 cents per U.S. dollar and traded at C$1.001, up 0.3 percent, at 8:31 a.m. in Toronto. It last traded above parity on Sept. 21. The currency, nicknamed the loonie, is up for four straight days, the longest streak since July. One Canadian dollar buys 99.95 U.S. cents.

The euro reached a six-week high versus the dollar as European leaders prepared to meet to complete a solution to the region’s debt crisis. German Chancellor Angela Merkel and fellow EU leaders will return to Brussels tomorrow for a second summit in four days to discuss Europe’s bailout fund.

“There’s a lot of optimism that a plan will be unveiled that will satisfy the market’s very high expectations,” said BMO’s Jespersen. “I’m a bit surprised to see risk appetite so strong. The market is getting ahead of itself.”

Retail sales increased 0.5 percent to a seasonally adjusted C$37.8 billion ($37.8 billion) compared with July, Statistics Canada said in Ottawa. Economists surveyed by Bloomberg News predicted a 0.3 percent gain, according to the median of 22 responses.

--Editors: Paul Cox, Dennis Fitzgerald

To contact the reporter on this story: Chris Fournier in Halifax, Nova Scotia at cfournier3@bloomberg.net

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


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