Bloomberg News

Canadian Dollar Climbs Against Most Major Peers Amid Haven Bid

January 31, 2012

Jan. 30 (Bloomberg) -- Canada’s dollar fluctuated versus its U.S. counterpart and climbed against most of its other major peers as sparring over a second bailout for Greece spurred demand for safety.

The currency was supported by speculation Canada’s exports will benefit from accelerating growth in the U.S., the nation’s biggest trade partner. It trimmed a drop against the greenback as crude oil slowed a retreat. Stocks fell amid speculation the negotiations between Greece and European officials will snarl efforts to resolve Europe’s debt crisis.

“It’s very much still Europe at the moment,” Dean Popplewell, head analyst in Toronto at the online-currency trading firm Oanda Corp., said in a telephone interview. “The only thing that’s holding the Canadian dollar at the moment is the cross-play,” he said, referring to trades against non-U.S. dollar currencies.

Canada’s dollar, nicknamed the loonie for the image of the aquatic bird on the C$1 coin, was little changed at C$1.0015 per U.S. dollar at 5 p.m. Toronto time. It gained against all but two of its 16 most-traded counterparts. The loonie, which appreciated 1.1 percent last week, fell as much as 0.5 percent earlier today. It was poised for a 2 percent gain versus the greenback for January, its first monthly advance since October. One Canadian dollar buys 99.85 U.S. cents.

Bonds Rise

Canadian government bonds rose, pushing the yield on the 10-year note down as much as seven basis points to 1.91 percent, the lowest since Jan. 18, before trading at 1.94 percent. A basis point is 0.01 percentage point. The yield on the 10-year U.S. Treasury note decreased five basis points to 1.84 percent.

The greenback rose today against most major currencies as Greece, where the debt crisis began in 2009, faced criticism its economic makeover is faltering. It fended off German and Dutch calls for a European overseer to take command of its budget.

“The U.S. dollar is higher on the overall flight-to- quality bid, predominantly on the news out of Europe,” Jack Spitz, managing director of foreign exchange at National Bank of Canada in Toronto, said in a telephone interview. “The global backdrop does not speak to improved sentiment; it continues to speak to uncertainty.”

Greece’s aid won’t be finalized today because talks over debt restructuring aren’t complete, German Chancellor Angela Merkel said earlier, while French President Nicolas Sarkozy said he expects an accord in the next few days.

European Summit

European Union leaders at a summit in Brussels agreed on a deficit-reduction treaty that will speed sanctions on violators and require balanced-budget provisions at a national level, two EU spokesmen said. Officials also decided to bring the EU’s permanent rescue fund, the European Stability Mechanism, into operation July 1, a year ahead of schedule.

The summit was the 16th in the two years since Greece’s fiscal emergency provoked Europe-wide turmoil.

Crude oil for March delivery dropped as much as 1.3 percent to $98.43 a barrel in New York before trading at $98.94, down 0.8 percent. Crude is Canada’s biggest export. The Standard & Poor’s 500 Index fell 0.3 percent in its third daily decline, its longest losing stretch since December.

The Canadian dollar strengthened against the Australian dollar by the most on an intraday basis in six weeks, on bets the loonie will outperform fellow commodity-exporters as the U.S. economy heats up while China’s output cools.

Reached Parity

Down 0.1 percent this year after having lost 1.8 percent in 2011 against nine developed-nation counterparts in Bloomberg Correlation-Weighted Currency Indexes, the loonie rose to parity with the greenback last week for the first time since November. Foreigners piled into Canadian money-market securities at more than double the record pace set in 2008. Speculators have cut bets that the currency will fall against resource-rich peers.

The outlook is improving as Canada grows in lockstep with the U.S. and after it swung to a merchandise trade surplus in November on higher exports of energy and automobiles. The Australian dollar is the most overvalued in two decades versus the loonie, while slower Chinese growth amid higher inflation may lessen the attraction of countries that depend on selling raw materials to Asia’s biggest economy.

U.S. employers added 200,000 jobs in December, twice the previous month’s pace, as the jobless rate fell to 8.5 percent from 8.6 percent in November. Gross domestic product increased at a 2.8 percent annual rate in the fourth quarter, according to a Commerce Department report Jan. 27. That compared with a 1.8 percent advance in the previous three-month period.

The Canadian currency gained 0.6 percent today to C$1.0615 per Australian dollar after climbing 0.8 percent earlier, the biggest intraday jump since Dec. 19. The loonie appreciated 0.7 percent versus New Zealand’s dollar to 82.04 Canadian cents.

“Canada is a relative outperformer today if measured against other risk-related currencies,” said National Bank’s Spitz. “Month-end flows means there should be some U.S. dollar selling at the fixes.”

--Editors: Greg Storey, Dave Liedtka

To contact the reporter on this story: Chris Fournier in Halifax, Nova Scotia, at

To contact the editor responsible for this story: Dave Liedtka at

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