Bloomberg News

Canadian Dollar Advances From One-Month Low Against Yen

April 09, 2012

Canada’s dollar strengthened from its lowest level against the yen in a month amid speculation that North America’s economies will sustain their recoveries.

The currency weakened to parity earlier against the U.S. dollar after an April 6 report showed America’s employers added fewer jobs last month than economists forecast, discouraging demand for higher-yielding assets. Crude oil, Canada’s largest export, fell today.

“Nonfarm payroll numbers on Friday, while unexpected and a bit of a shock to the market in the short term, it was a knee- jerk reaction,” Thomas Molloy, chief dealer at FX Solutions LLC, an online currency-trading company in Saddle River, New Jersey, said in a telephone interview. “Cooler heads over the weekend have prevailed, and the press has very much been of the order that this is only one number and one number doesn’t really make a trend.”

Canada’s currency, nicknamed the loonie, fell 0.2 percent to 81.69 yen at 5:02 p.m. in Toronto after weakening to 81.25 yen, the lowest level since March 8. The Canadian dollar slid as much as 0.3 percent to C$1.0002 per U.S. dollar, its first breach of parity since March 29, before trading at 99.72 cents.

Yields on Canadian 10-year government bonds dropped five basis points, or 0.05 percentage point, to 2.07 percent after touching 2.02 percent, the lowest level in almost a month. U.S. Treasury 10-year yields tumbled 13 basis points on April 6 in the wake of the jobs report. Canadian bond markets were closed that day for a holiday.

‘Tail End’

“We’re still dealing with the tail end of the disappointing nonfarm payrolls report,” said Sebastien Galy, a senior currency strategist at Societe Generale SA in New York, by e-mail.

Canada will auction C$3.3 billion ($3.3 billion) of two- year bonds on April 11. The securities will have a coupon of 2.25 percent and mature Aug. 1, 2014.

The nation’s federal government bonds have lost 0.9 percent this year, while U.S. Treasuries have declined 1.09 percent, according to Bank of America Merrill Lynch indexes.

Investors have eliminated bets that Bank of Canada Governor Mark Carney will cut borrowing costs following a report that showed the fourth-largest gain in employment in records dating from 1976.

Carney Watch

Odds that Carney will reduce the Bank of Canada’s target rate sometime this year fell to zero on April 5, according to Bloomberg calculations based on overnight index swaps, after Statistics Canada reported an increase of 82,300 jobs in March, about eight times economists’ forecasts. Investors were pricing in a 35 percent chance of a cut by September a month ago.

Canada’s currency traded as low as C$1.0319 in early January before rallying to 98.42 cents per U.S. dollar last month as the Standard & Poor’s 500 Index gained. Optimism over accelerating global growth bolstered demand for Canada’s raw materials, which account for about half of export revenue.

The 120,000 increase in U.S. payrolls reported by the Labor Department in Washington last week was the smallest in five months and less than the most pessimistic estimate in a Bloomberg News survey of economists.

The loonie rose 3.2 percent during the past six months in the third-best performance among the 10 major currencies tracked by Bloomberg Correlation-Weighted Indexes. Norway’s krone gained the most at 5.6 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: Paul Cox at pcox16@bloomberg.net


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