Bloomberg News

Canadian Dollar Advances for Fourth Day as Risk Appetite Rises

November 30, 2011

Nov. 29 (Bloomberg) -- Canada’s dollar rose as oil prices climbed and American consumer confidence increased in November by the most in more than eight years, boosting appetite for higher-yielding assets.

The currency appreciated for a fourth day versus its U.S. counterpart in its longest stretch of gains since July, trimming its monthly loss to 3 percent. Canada’s third-quarter current account deficit narrowed from the second largest on record as aircraft and metals led a rebound in exports.

“It’s a risk-on story today,” Rahim Madhavji, president of Knightsbridge Foreign Exchange Inc., said in a telephone interview from Toronto. “Consumer confidence in the U.S. has been surprisingly positive.”

Canada’s currency, also known as the loonie for the image of the aquatic bird on the C$1 coin, gained 0.2 percent to C$1.0321 per U.S. dollar by 5 p.m. in Toronto. It earlier rose to C$1.0259, the strongest since Nov. 18. One Canadian dollar buys 96.89 U.S. cents.

Futures on crude oil, Canada’s biggest export, climbed for a third day. Oil gained 1.8 percent to $99.48 a barrel in New York trading. The Standard & Poor’s 500 Index rose 0.2 percent, while Canada’s S&P/TSX Composite Index added 0.8 percent.

Canada’s current account deficit narrowed in July through September to C$12.1 billion, Statistics Canada said today in Ottawa. The current account is the broadest measure of international trade, encompassing goods, services and investment. The third-quarter shortfall was the 12th straight and followed a C$16.1 billion deficit. Economists surveyed by Bloomberg News forecast a gap of C$11.1 billion, according to the median of 17 responses.

‘Dependent’ on Inflows

“Thanks to the merchandise trade account returning to surplus, Canada was able to see an improvement in its broadest measure of trade,” Krishen Rangasamy, senior economist at National Bank of Canada in Montreal, said in a note to clients. “That said, the overall current account deficit is huge, meaning that the Canadian dollar remains dependent on capital inflows.”

The yield on 10-year Government of Canada bonds was little changed at 2.12 percent after earlier gaining seven basis points. The price of the 3.25 percent securities maturing in June 2021 rose 2 cents to C$109.70.

The Conference Board’s consumer confidence index increased to 56 from 40.9 in October, the biggest monthly gain since April 2003, figures from the New York-based private research group showed today. The gauge, at a four-month high, exceeded the most optimistic forecast in a Bloomberg News survey of economists. The U.S. is Canada’s biggest trading partner.

The loonie has weakened 3.2 percent this year, according to Bloomberg Correlation-Weighted Currency Indexes, a gauge of 10 developed-nation currencies. The greenback has gained 0.8 percent, and the yen has advanced 3.7 percent.

--Editors: Kenneth Pringle, Dave Liedtka

To contact the reporters on this story: Frederic Tomesco in Montreal at tomesco@bloomberg.net; Chris Fournier in Montreal at cfournier3@bloomberg.net

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


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