Bloomberg News

Canada Dollar Climbs Amid U.S. Confidence, Europe’s Debt Plan

December 10, 2011

Dec. 9 (Bloomberg) -- Canada’s dollar gained from its weakest this month as a jump in consumer confidence in the U.S., the nation’s biggest trade partner, and Europe’s latest plans to deal with its debt crisis spurred appetite for riskier assets.

The Canadian currency, also known as the loonie for the image of the aquatic bird on the C$1 coin, rose against 10 of its 16 most-traded peers as stocks climbed. It had fluctuated earlier as investors weighed the European Union’s plans to boost its rescue fund and tighten budget rules.

“Canada’s dollar is following along broader sentiment here,” Camilla Sutton, chief currency strategist at Bank of Nova Scotia’s Scotia Capital unit in Toronto, said in a telephone interview. “Our economy is intertwined with the U.S., and so what happens in the U.S. tends to follow in Canada.”

Canada’s currency appreciated 0.6 percent to C$1.0169 per U.S. dollar at 5 p.m. in Toronto after touching C$1.0263 earlier, the weakest level since Nov. 30. It gained 0.3 percent on the week. One Canadian dollar buys 98.34 U.S. cents.

The Standard & Poor’s 500 Index advanced 1.7 percent, and the S&P TSX Composite Index benchmark of Canadian stocks rose 0.7 percent.

Canadian government bonds dropped, sending benchmark 10- year yields up seven basis points, or 0.07 percentage point, to 2.06 percent. The yields touched 1.979 percent yesterday, the lowest level in Bloomberg records.

European Changes

The loonie weakened earlier amid speculation European leaders will struggle to institute changes agreed to today to counter the region’s sovereign-debt crisis. Officials holding all-night talks in Brussels added 200 billion euros ($267 billion) to their crisis-fighting warchest and tightened anti- deficit rules, an accord hailed by European Central Bank President Mario Draghi as a “very good outcome.”

“I’m surprised we’re seeing euro so resilient here,” Scotia’s Sutton said. “In terms of the growth side, which will improve the fiscal side, we’re a long way from there, and there’s a tremendous amount of uncertainty around that.”

The currency strengthened as the Thomson Reuters/University of Michigan preliminary index of consumer sentiment in the U.S. climbed to a six-month high. The gauge increased to a reading of 67.7 this month from 64.1 at the end of last month. The median estimate of 73 economists surveyed by Bloomberg News called for a reading of 65.8.

North American Economy

Canada’s dollar reached the strongest level in more than a month against the greenback yesterday, $1.0052. It was the best performer over the past month versus all of its 16 major counterparts on speculation the North American economy will endure Europe’s debt crisis and as crude oil traded near $100 a barrel.

Crude futures dropped as much as 0.6 percent today to $97.36 a barrel in New York before rising 1.9 percent to $99.82, paring a weekly loss to 1.3 percent.

Bank of Canada policy makers said on Dec. 6 that growth in the domestic and U.S. economy is stronger than forecast, easing speculation the central bank would signal further monetary easing. That has also helped the nation’s currency.

--Editors: Greg Storey, Paul Cox

To contact the reporters on this story: Chris Fournier in Montreal at cfournier3@bloomberg.net; John Detrixhe in New York at jdetrixhe1@bloomberg.net

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


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