Bloomberg News

Canada Dollar Drops as Higher U.S. Jobless Claims Trail

April 19, 2012

Canada’s dollar dropped against the greenback for a second day as jobless-benefit claims rose in the U.S., the nation’s biggest trading partner, damping demand for assets tied to growth.

The loonie, as Canada’s currency is known, fell as stocks and oil, Canada’s largest export, slumped. The Canadian dollar is up 0.4 percent versus the greenback this week after Bank of Canada Governor Mark Carney signaled removing stimulus was an “appropriate” measure to contain consumer debt levels.

“The data that we’re seeing out of the U.S. offered more evidence that the recovery shifted into a lower gear, so that doesn’t bode well for Canada,” said Joe Manimbo, a market analyst in Washington at Western Union Business Solutions, a unit of Western Union Co. (WU:US) “The loonie’s downside appears to be protected by the growing view that the BOC is likely to raise rates ahead of previous forecasts.”

Canada’s currency, nicknamed the loonie, declined 0.5 percent to 99.57 cents per U.S. dollar at 5:02 p.m. in Toronto. It reached 98.65 cents on April 17, the strongest since March 20. One Canadian dollar buys $1.0043.

The Standard & Poor’s 500 Index declined 0.6 percent while crude oil futures fell 0.1 percent to $102.60 a barrel in New York.

Bonds Gain

Ten-year government bonds were little changed, yielding 2.04 percent. The 3.25 percent securities maturing in June 2021 fell four cents to C$109.98.

Federal bonds have lost 0.5 percent this year, according to Bank of America Merrill Lynch data.

Odds of an increase in the central bank’s target lending rate by the October meeting were about 59 percent today, according to Bloomberg calculations on overnight index swaps. They were about 27 percent on April 5.

“The market remains skittish,” said Firas Askari, head currency trader at Bank of Montreal (BMO) in Toronto, in an e-mail. “There’s been a U.S. dollar bounce across the board.”

The Canadian dollar advanced 0.8 percent during the past three months among 10 currencies tracked by Bloomberg Correlation Weighted Indexes. That compared with a 2.7 percent drop in the Australian dollar and a 7.3 percent decline in the yen.

Canada Views

“Canada looks much stronger on both a relative basis in terms of growth and just on a balance-sheet basis,” said Boris Schlossberg, director of research at the online currency trader GFT Forex, by phone from New York. “It looks attractive because the Bank of Canada seemed to signal a little bit more of a hawkish posture. A huge part of how Canada trades is going to be dependent on the U.S. economy over the next couple of months.”

U.S. jobless claims fell by 2,000 to 386,000 in the week ended April 14 from a revised 388,000 the prior period that was higher than initially estimated, Labor Department figures showed today in Washington. The median forecast of 47 economists surveyed by Bloomberg News called for a drop to 370,000.

Canada’s consumer price index rose at an annualized 2 percent pace in March, according to the median forecast of 25 forecasts in a Bloomberg survey. Statistics Canada releases the data, along with leading indicators, forecast to advance 0.5 percent in March, at 8:30 a.m. tomorrow in Ottawa.

The loonie will appreciate to 98 cents by the end of 2012, according to the median forecast in a Bloomberg News survey of economists.

To contact the reporters on this story: Catarina Saraiva in New York at asaraiva5@bloomberg.net; Chris Fournier in Halifax at cfournier3@bloomberg.net

To contact the editor responsible for this story: Dave Liedtka at dliedtka@bloomberg.net


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