Bloomberg News

Canadian Dollar Rises to 3-Week High on Global Factory Strength

January 04, 2012

Jan. 3 (Bloomberg) -- The Canadian currency rose to the highest level in more than three weeks versus its U.S. counterpart as evidence of manufacturing strength in America, China and India buoyed higher-yielding assets.

The loonie, as the Canadian dollar is known, is one of the best performers in the past three months against the greenback among the most-traded currencies, trailing the Australian dollar. The Canadian currency extended its gain today after a report showed U.S. manufacturing grew in December at the fastest pace in six months. Commodities gained.

“It’s a reasonably constructive day for risk and the broader commodity complex, and the Canadian dollar is part of that,” Jeremy Stretch, head of currency strategy at Canadian Imperial Bank of Commerce in London, said in a telephone interview. “The manufacturing data we’ve seen over the last 24- 36 hours shows moderate improvement in some cases, and bigger improvement in others.”

The Canadian dollar appreciated 0.8 percent to C$1.0104 per U.S. dollar at 5 p.m. Toronto time. The loonie advanced as much as 1.1 percent to C$1.0077, the strongest level since Dec. 8. One Canadian dollar buys 98.97 U.S. cents.

The Standard & Poor’s 500 Index rallied on its first trading day of the year, climbing 1.6 percent, while Canada’s benchmark S&P/TSX Composite Index added 2.1 percent. Futures on crude oil, Canada’s biggest export, soared as much as 4.2 percent to $103.18 a barrel in New York trading.

Government Bonds

The yield on 10-year Government of Canada bonds increased five basis points, or 0.05 percentage point, to 1.99 percent. The price of the 3.25 percent securities maturing in June 2021 fell 45 cents to C$110.78.

The Canadian currency got a boost as the Institute for Supply Management’s U.S. factory index climbed to 53.9 last month from 52.7 in November. Fifty is the dividing line between growth and contraction.

Reports this week showed output in Australia grew for the first time in six months as well as a pickup in China’s and India’s manufacturing.

“Some of the components of the manufacturing ISM in the U.S. were pretty robust,” said Stretch at CIBC. “There’s a realization that markets maybe got a little bit oversold at the end of last year.”

The loonie has risen 3.1 percent in the past three months, according to Bloomberg Correlation-Weighted Currency Indexes, a gauge of 10 developed-nation currencies. The Australian dollar has jumped 7.8 percent and the New Zealand dollar has gained 3.2 percent. The U.S. currency has declined 1 percent and the yen has fallen 2.5 percent.

--Editors: Kenneth Pringle, Greg Storey

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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