Bloomberg News

Canadian Dollar Rises Against Peers on U.S. Growth Bet

April 03, 2012

Canada’s dollar appreciated against most of its major peers amid signs the U.S., nation’s biggest trading partner, is helping to stabilize the global economy.

The currency briefly weakened against the greenback after minutes of the March 13 Federal Open Market Committee meeting showed members won’t increase stimulus unless the U.S. economic expansion falters or prices rise at a rate slower than its 2 percent target. Bank of Canada Governor Mark Carney said yesterday that the nation’s economy has performed better than forecast.

“We’re going to benefit from any North American strength,” John Curran, senior vice president in Toronto at CanadianForex Ltd., an online foreign-exchange dealer, said in a telephone interview. “Canada is being used as a proxy trade for U.S. growth and is seen as less risky. With our strong background and the strong recovery that Canada has seen relatively speaking, it’s a good story for us.”

Canada’s currency, nicknamed the loonie, was little changed at 99.11 cents per U.S. dollar at 5 p.m. in Toronto, after climbing as high as 98.88 cents. One Canadian dollar buys $1.0090.

“Investors are interested in Canada and most developments have been positive,” Camilla Sutton, head of currency strategy in Toronto at Bank of Nova Scotia (BNS)’s Scotia Capital unit, said in a telephone interview. “The factors for Canada in the past couple of weeks have been positive, everything from the budget to U.S. economic data to governor Carney’s speech yesterday.”

Growth Engine

The U.S. may be emerging as a main engine for global growth as Europe slides into recession and China’s economy decelerates.

An improving job market, rising stock prices and easier credit are combining to lift U.S. consumer confidence and spending, with optimism measured by the Bloomberg Comfort Index near a four-year high. Personal-consumption expenditures increased by the most in seven months in February, rising 0.8 percent, the Commerce Department said last week.

“There seems to be a growing consensus that U.S. is growing fairly well,” Thomas Molloy, chief dealer at FX Solutions LLC, an online currency trading company in Saddle River, New Jersey, said in a telephone interview. “The recovery in the U.S. seems to be a durable one, but it’s certainly not that robust, and it’s very much in contrast to the economic situation in euro zone.”

Oil, Canada’s largest export, fell following the biggest gain in six weeks as supplies in the U.S., the world’s biggest crude consumer, were forecast to climb to a seven-month high. Crude-oil futures declined 1 percent to $104.10 a barrel in New York.

Bonds Sales

Canadian corporate-bond issuance fell almost 50 percent in the first quarter in contrast to record-setting volumes worldwide, prompting Royal Bank of Canada to cut its full-year forecast for debt sales.

Deals by companies and banks in Canadian dollars fell to C$21 billion ($21.2 billion) in the first quarter from C$31 billion in the comparable period in 2011, according to data compiled by Bloomberg. RBC Capital Markets, the top underwriter of Canadian corporate bonds for the past decade, was expecting more than C$82 billion of issuance in 2012 as banks raise money to fund expanding operations and roll over maturing debt.

Canada’s unemployment rate was unchanged in March at 7.4 percent as payrolls increased by 10,500 after falling by 2,800 the previous month, according the median estimate of 24 economists surveyed by Bloomberg. Statistics Canada will report the data on April 5.

Jobs Outlook

“As we look ahead to the future, it’s really employment out of Canada Thursday and out of the U.S. on Friday,” Sutton said. “We’ve had a string of disappointing Canadian releases and with the U.S. economic outlook improving, it really only makes sense that the Canadian outlook would improve as well.”

U.S. unemployment held at a three-year low of 8.3 percent in March, and payrolls rose by more than 200,000 workers for a fourth consecutive month, according to the median forecast of economists surveyed by Bloomberg News. The Labor Department will release last month’s figures on April 6.

The loonie is up 3.9 percent during the past six months, according to Bloomberg Correlation-Weighted Indexes, which track 10 developed-market currencies. The U.S. dollar is down 2.4 percent.

To contact the reporter on this story: 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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