Bloomberg News

Canada’s Dollar Advances on Evidence of U.S. Economic Recovery

November 16, 2011

Nov. 16 (Bloomberg) -- Canada’s dollar rose versus most of its major counterparts as signs of a U.S. economic recovery buoyed confidence that Canadian exports will benefit from increasing demand in their biggest market.

The loonie, as the currency is known, pared its loss versus the U.S. dollar as crude oil rallied to above $102 a barrel. The Canadian dollar fell earlier to a five-week low as Europe’s debt turmoil discouraged demand for riskier assets.

“The U.S. data today was generally stronger than expected, and that’s good for the Canadian outlook,” Camilla Sutton, chief currency strategist at Bank of Nova Scotia’s Scotia Capital unit, said in a telephone interview from Toronto. “Increasingly, the market is viewing Canada as a commodity and U.S. growth play that’s temporarily swayed by risk aversion.”

Canada’s currency depreciated 0.2 percent to C$1.0231 per U.S. dollar at 3:39 p.m. Toronto time. Earlier it touched C$1.0288, the weakest level since Oct. 12. One Canadian dollar buys 97.74 U.S. cents. The loonie appreciated 0.3 percent to C$1.6107 against the pound, and gained versus 12 of its 16 most- traded counterparts including the euro and Swiss franc.

Futures on crude oil, Canada’s biggest export, jumped as much as 3.6 percent to $102.89 a barrel in New York, the highest level since June 1, before trading at $101.86. Oil has gained about 18 percent over the past month, while the Canadian dollar lost 1.3 percent of its value against its U.S. counterpart.

Playing ‘Catch-Up’

“Oil and the Canadian dollar have historically had a strong correlation, but not so much in the last month,” Rahim Madhavji, president of Knightsbridge Foreign Exchange Inc., said in a telephone interview from Toronto. “Today the loonie is playing a bit of catch-up.”

Industrial production in the U.S. advanced in October more than economists forecast, a Federal Reserve report showed. The U.S. is Canada’s largest export market, soaking up about three- quarters of its goods shipped abroad.

Output at U.S. factories, mines and utilities climbed 0.7 percent after a revised 0.1 percent drop in September. Economists forecast a 0.4 percent gain, according to the median of 83 estimates in a Bloomberg News survey.

The yield on 10-year Government of Canada bonds fell two basis points, or 0.02 percentage point, to 2.11 percent. The price of the 3.25 percent securities maturing in June 2021 increased 17 cents to C$109.84.

The loonie gained 0.8 percent over the past month, according to Bloomberg Correlation-Weighted Currency Indexes, a gauge of 10 developed-nation currencies. The greenback rose 2.7 percent, and the yen increased 1.3 percent.

--Editors: Kenneth Pringle, Greg Storey

To contact the reporter for this story: Frederic Tomesco in Montreal at tomesco@bloomberg.net.

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


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