Bloomberg News

Canada Dollar Erases Gains as Stocks Decline on Euro Concern

November 17, 2011

Nov. 16 (Bloomberg) -- Canada’s dollar erased gains as stocks declined after Fitch Ratings said the spread of the European debt crisis may threaten U.S. banks.

Canada’s currency fell 0.3 percent to C$1.0245 per U.S. dollar at 5 p.m. in Toronto. Earlier it rose to C$1.0172. One Canadian dollar buys 97.60 U.S. cents.

“We’ve weakened off as equities took a bit of a dive,” Shane Enright, executive director at Canadian Imperial Bank of Commerce’s CIBC World Markets, said by phone from Toronto. “Europe is still very much the touch point for risk, and the market is very nervous. With that come some facts and a lot of speculation.”

The Standard & Poor’s 500 Index slid 1.7 percent, having earlier gained as much as 0.5 percent. Most of the decline came in the final two hours of trading. Canada’s benchmark Standard & Poor’s/TSX Composite Index dipped 0.5 percent.

Unless the euro-zone debt crisis is resolved “in a timely and orderly” manner, “the broad credit outlook for the U.S. banking industry could worsen,” New York-based Fitch said today in a statement. U.S. banks have manageable direct exposure to stressed European markets in Greece, Ireland, Italy, Portugal and Spain, “but further contagion poses a serious risk,” the rating company said.

The yield on 10-year Government of Canada bonds fell 3 basis points to 2.09 percent. The price of the 3.25 percent securities maturing in June 2021 rose 26 cents to C$109.92 after having declined as much as 10 cents.

Largest Market

Canada’s dollar earlier gained after industrial production in the U.S. advanced more than forecast in October, while the cost of living in the country unexpectedly fell for the first time in four months. The U.S. is Canada’s largest export market, soaking up about three-quarters of goods that the country ships abroad.

Output at U.S. factories, mines and utilities climbed 0.7 percent after a revised 0.1 percent drop in September, figures from the Federal Reserve showed today. Economists forecast a 0.4 percent gain, according to the median of 83 estimates in a Bloomberg News survey. Factory production, which makes up 75 percent of the total, increased 0.5 percent.

“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.

The loonie has gained 1.3 percent in the past month, according to Bloomberg Correlation-Weighted Currency Indexes, a gauge of 10 developed-nation currencies. The greenback has gained 1.8 percent, and the yen has lost 0.2 percent.

--Editors: Kenneth Pringle, Dave Liedtka

To contact the reporter for this story: Frederic Tomesco in Montreal at

To contact the editor responsible for this story: Dave Liedtka at

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