Canada’s Dollar Increases From Lowest Level in Almost Two Weeks
November 03, 2011, 5:21 AM EDTBy Frederic Tomesco and Chris Fournier
Nov. 2 (Bloomberg) -- Canada’s dollar rose from the lowest level in almost two weeks on increased demand for riskier assets after the Federal Reserve acknowledged U.S. economic growth “strengthened somewhat” in the third quarter.
The Canadian currency tracked North American stocks and commodities including crude oil as European leaders prepared to tell Greek Prime Minister George Papandreou after his call for a referendum that he has no alternative to the budget cuts imposed in the region’s bailout plan.
“The main issues for the loonie are still oil, which is down from its highs, and worries about Greece,” said Rahim Madhavji, president of Knightsbridge Foreign Exchange Inc. in Toronto. “You can feel confident the Fed will do something if things get bad.”
Canada’s currency, known as the loonie for the image of the aquatic bird on the C$1 coin, climbed for the first time in four days, appreciating 0.7 percent to C$1.0136 per U.S. dollar at 5 p.m. in Toronto. It slid earlier to C$1.0224, the weakest level since Oct. 20. One Canadian dollar buys 98.66 U.S. cents.
Futures on crude oil, Canada’s biggest export, gained 1.4 percent to $92.89 a barrel after rising as much as 2.4 percent. The Standard & Poor’s 500 Index increased 1.6 percent after yesterday’s 2.8 percent plunge, while the S&P/TSX Composite Index advanced 1.1 percent.
“The market is adding some risk today,” John Curran, senior vice president at the online dealer CanadianForex Ltd., said in a telephone interview from Toronto.
Currency Volatility
One-month implied volatility of the U.S. dollar versus the Canadian currency dropped for the first time in three sessions, falling nine basis points to 12.87 percent. Volatility increased 140 basis points yesterday, the most since Sept. 22.
Implied volatility, which traders quote and use to set option prices, signals the expected pace of swings in the underlying currency.
A drop in government bonds pushed the 10-year yield up two basis points, or 0.02 percentage point, to 2.17 percent. The price of the 3.25 percent securities maturing in June 2021 fell 18 cents to C$109.30. The yield slid yesterday to 2.11 percent, the lowest level since Oct. 5.
Canada sold C$3 billion ($3 billion) of bonds due in February 2015 at an average yield of 1.219 percent and a bid-to- cover ratio of 2.361. The ratio measures demand by calculating how much was bid versus how much was sold. The previous offering in August produced an average yield of 0.965 percent and a bid- to-cover ratio of 2.185.
Job Market
The nation’s economy added 15,000 jobs last month, according to the median projection in a Bloomberg News survey of 27 economists before Statistics Canada’s Nov. 4 report. The unemployment rate is forecast to stay at 7.1 percent.
The Canadian dollar rallied 1 percent during the five days ended Oct. 7, when the government reported that the economy added 60,900 jobs in September, more than four times as many as economists had forecast.
U.S. central bank policy makers said in their statement today that while economic growth accelerated somewhat in the third quarter, “significant downside risks” remain. They refrained from taking new steps to ease monetary policy.
Fed officials lowered their outlook for U.S. economic growth in 2012 and forecast that unemployment will average from 8.5 percent to 8.7 percent in the final three months of next year. Fed Chairman Ben S. Bernanke said at a press conference that the central bank’s purchase of mortgage-backed securities is a “viable option” if conditions are appropriate.
The loonie, as the currency is also known, declined 0.2 over the past month, according to Bloomberg Correlation-Weighted Currency Indexes, a gauge of 10 developed-nation currencies. The greenback fell 4.1 percent, and the yen weakened 7.5 percent.
--Editors: Dennis Fitzgerald, Greg Storey
To contact the reporters on this story: Frederic Tomesco in Montreal at tomesco@bloomberg.net; Chris Fournier in Halifax, Nova Scotia, at cfournier3@bloomberg.net
To contact the editor responsible for this story: Dave Liedtka at dliedtka@bloomberg.net
