Bloomberg News

Canada’s Dollar Fluctuates as Crude Oil, Stocks Reverse Gains

December 20, 2011

Dec. 19 (Bloomberg) -- Canada’s dollar swung between gains and losses versus its U.S. counterpart as crude oil and stocks reversed earlier advances, muddying the outlook for currencies tied to growth.

The Canadian currency fluctuated after falling 2.1 percent last week, the most in five days since Nov. 4, on speculation European leaders are failing to contain the region’s debt crisis. The currency, also known as the loonie for the image of the waterfowl on the C$1 coin, pared an advance even as Canada’s statistics agency said wholesale sales rose in October more than economists forecast.

“Canada will be influenced by and large by the global backdrop,” said Jack Spitz, managing director of foreign exchange at National Bank of Canada in Toronto, in a telephone interview. “Until we see any kind of breakout price action -- either coming from the euro below its lows or by way of any kind of relief rally that would come from equity markets -- I suspect dollar-Canada is going to trade within this relatively tight range.”

Canada’s currency was little changed at C$1.0389 per U.S. dollar at 5 p.m. in Toronto. Earlier in the day it declined to C$1.0415, the weakest level since Dec. 14, when it reached the low for the month of C$1.0424. It rose as much as 0.5 percent and was up against most of its major counterparts. One Canadian dollar buys 96.26 U.S. cents.

Crude oil for January delivery on the New York Mercantile Exchange rose 55 cents to $94.08 a barrel after climbing 1 percent and falling 1.1 percent. The Standard & Poor’s 500 Index fell 1.2 percent after gaining 0.4 percent.

Government bonds rose for a sixth session, pushing 10-year yields down three basis points, or 0.03 percentage point, to 1.84 percent. Yields touched 1.837 percent on Dec. 16, the record low. The bonds yielded three basis points more than equivalent-maturity U.S. debt, compared with eight basis points at the end of November.

‘Trend Reversal’

“A rally in European and U.S. equities attracted interbank selling interest in the U.S. dollar versus the Canadian dollar,” said George Davis, chief technical analyst for fixed- income and foreign-exchange strategy in Toronto at Royal Bank of Canada, in a note to clients today.

An hourly close below C$1.0338 would “trigger a bearish short-term trend reversal” for the U.S. dollar that would “expose C$1.0283 and C$1.0227 as secondary downside targets,” according to Davis.

Canadian wholesale sales rose 0.9 percent to C$49.2 billion ($47.5 billion) in October in a sixth straight monthly gain led by rising shipments of motor vehicles and machinery, Statistics Canada said today. The increase exceeded all 13 forecasts in Bloomberg News survey of economists, which had a median projection for a 0.1 gain.

‘Consolidation Mode’

“We’re still in consolidation mode from late last week,” said Blake Jespersen, director of foreign exchange in Toronto at Bank of Montreal, in an e-mail message. “The tone appears a bit better today.”

Canada’s consumer price index rose 2.9 percent in November from a year earlier, matching the prior month’s increase, according to the median forecast of 22 economists in a Bloomberg News survey. Statistics Canada is scheduled to release the report at 7 a.m. tomorrow in Ottawa.

The agency is scheduled to release its retail-sales figures the next day and the gross domestic product report two days after that.

“It’s an important week for Canadian data,” said Bank of Montreal’s Jespersen. “We are entering one of the quietest periods of the year, so it will be interesting to see if anyone notices.”

The loonie has depreciated 2.8 percent in 2011, according to Bloomberg Correlation-Weighted Currency Indexes, a gauge of 10 developed-nation currencies. The greenback has appreciated 2 percent, and the yen has added 4.7 percent.

--With assistance from Theophilos Argitis in Ottawa. Editors: Kenneth Pringle, Bob Brennan

To contact the reporter on this story: 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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