Bloomberg News

Canada’s Dollar Declines as Crude Oil Falls on European Concern

November 15, 2011

Nov. 14 (Bloomberg) -- Canada’s dollar fell for the first time in three days against its U.S. counterpart on concern European nations may have difficulty repaying their debt, discouraging demand for higher-yielding assets.

The Canadian currency dropped as crude oil, Canada’s biggest export, fell. The Canadian dollar underperformed today after rising versus its commodity-related peers such as the Australian dollar earlier this month.

“It’s European concern” that’s weakening the Canadian dollar, said Philippe Denolf, a currency trader in Montreal at Laurentian Bank of Canada, in a telephone interview. “Stocks are down so people are buying U.S. dollars.”

Canada’s currency depreciated 0.6 percent to C$1.0167 per U.S. dollar by 5 p.m. in Toronto. One Canadian dollar buys 98.36 U.S. cents.

The Standard & Poor’s 500 Index decreased 1 percent, while Canada’s benchmark Standard & Poor’s/TSX Composite Index dropped 0.4 percent. Futures on crude oil fell 0.9 percent to $98.11 a barrel.

Government bonds were little changed. The benchmark 10-year yield fell 1 basis point to 2.12 percent after falling three basis points last week. The price of the 3.25 percent security maturing in June 2021 rose 9 cents to C$109.75.

Bond Returns

Canada’s sovereign debt has returned 8.18 percent in 2011, compared with 8.6 percent for U.S. Treasuries, according to Bank of America Merrill Lynch data.

The Canadian dollar fell as Italian borrowing costs increased at a five-year note sale today. Italy sold the securities at a yield of 6.29 percent, up from 5.32 percent at the previous auction and the highest since June 1997. Mario Monti sought to form a new government in Italy to restore investor confidence in public finances.

“The focus will remain in Europe,” said Camilla Sutton, chief currency strategist at Bank of Nova Scotia’s Scotia Capital unit in Toronto, in an e-mail message. “The sovereign crisis appears to be entering a more dangerous stage. The Canadian dollar seems to have borne the brunt today.”

The loonie, as the Canadian currency is known, gained 1.7 percent against the Australian dollar in November, third most after the Swiss franc at 1.8 percent and New Zealand dollar at 2 percent.

--Editors: Kenneth Pringle, Paul Cox

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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