Bloomberg News

Canadian Dollar Falls to Lowest in December on Moody’s Euro View

December 13, 2011

Dec. 12 (Bloomberg) -- Canada’s dollar dropped as Moody’s Investors Service said it will review the credit ratings of European Union nations after last week’s summit, damping appetite for higher-yielding assets.

The loonie, as the currency is known, fell to the lowest level against its U.S. counterpart this month as crude oil decreased as much as 2.3 percent and government bonds rose. The Canadian currency rose against the majority of its most-traded counterparts and the U.S. dollar was the best performer as investors sought the safety of North American debt.

“Canada should test C$1.05 on the topside in the next two weeks, which will be a good level to buy,” said Dean Popplewell, head analyst in Toronto at the online-currency trading firm Oanda Corp. “We’re talking about Canada being the best of the bad lot and Europe is really in the crosshairs now.”

The loonie slid 1 percent to C$1.0271 per U.S. dollar at 5 p.m. Toronto time, after touching C$1.0286, the weakest since Nov. 30. One Canadian dollar buys 97.36 U.S. cents. The currency rose 0.5 percent to C$1.3545 against the euro.

Futures on crude oil, Canada’s biggest export, fell 1.9 percent to $97.83 a barrel in New York. The Standard & Poor’s 500 Index fell 1.5 percent, and the S&P/TSX Index, Canada’s equity benchmark, dropped 1.1 percent.

International Debt

The advance in Canadian government bonds pushed the yield on the two-year security down three basis points, or 0.03 percentage point, to 0.88 percent. The 1 percent securities maturing in February 2014 rose 5 cents to C$100.26. The yield on the U.S. two-year note was little changed at 0.22 percent.

Canada’s net international debt fell for the first time in 10 quarters during the July-September period as a decline in the loonie boosted the value of assets held abroad, Statistics Canada said today. The book value of the country’s shortfall fell by C$31.8 billion ($30.9 billion) to C$189.5 billion.

The failure of Canada’s dollar to rise above C$1.0113 has kept the weakening trend in tact versus the U.S. currency, according to Royal Bank of Canada.

The currency will have to see a daily close weaker than C$1.0271 to move to C$1.0364 and C$1.0486 and neutralize the risks of strengthening, George Davis, chief technical analyst for fixed-income and currency strategy in Toronto at RBC, wrote to clients today. A daily close of the greenback below C$1.0120 would be bullish for the Canadian dollar, according to the note.

European leaders announced a blueprint after meetings on Dec. 8 and 9 for a closer fiscal accord to save the euro, adding 200 billion euros ($265 billion) to their bailout fund and tightening rules to curb future debts.

The agreement offered few new measures and doesn’t diminish the risk of credit-ranking revisions, Moody’s said in its Weekly Credit Outlook. “Our intention as announced in November is to revisit the level and dispersion of ratings during the first quarter of 2012,” the company said.

--With assistance from Greg Quinn in Ottawa. Editors: Kenneth Pringle, Greg Storey

To contact the reporter on this story: Allison Bennett in New York at abennett23@bloomberg.net

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


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