Bloomberg News

Canadian Dollar Rises Against Most Majors as Stocks Pare Losses

July 12, 2012

Canada’s dollar appreciated against a majority of its most-traded counterparts after U.S. stocks and crude oil pared losses, improving the outlook for currencies tied to global demand.

The Canadian currency strengthened from the lowest this month against the greenback after a government report showed Canada’s new home price index rose 0.3 percent in May. It dropped earlier against the U.S. currency and the yen on concern the global slowdown is gaining momentum. Bank of Canada policy makers meet on July 17 to decide on interest rates.

“The Canadian dollar seems to be the only currency that is tracking the recovery in U.S. stocks,” Kathy Lien, managing director of foreign-exchange strategy at BK Asset Management in New York, said in a telephone interview. “Any sort of rally in the Canadian dollar should be looked at as an opportunity to sell. The Bank of Canada’s hands are tied for the rest of the year.”

Canada’s currency rose 0.1 percent to C$1.0191 per U.S. dollar at 5 p.m. in Toronto, after depreciating to C$1.0250, the lowest level since June 29. One Canadian dollar buys 98.13 U.S. cents.

The Standard & Poor’s 500 Index dropped 0.5 percent after losing 1.2 percent. Crude oil futures fell 0.4 percent to $85.82 a barrel in New York. Prices were down more than 2 percent.

Risk Floor

“Risk is attempting to climb off the floor, as is the euro,” said Jeremy Stretch, head of foreign-exchange strategy at Canadian Imperial Bank of Commerce in London. “Canada continues to look better on a comparative basis.”

Canadian government-bond yields are approaching record lows as investors seek safety amid an unresolved European debt crisis, slowing Chinese growth and a lethargic U.S. recovery.

The benchmark 10-year bond yielded 1.63 percent today, compared with 2.30 percent in March. The yield touched 1.615 percent on June 1, the lowest since at least 1950, according to Bloomberg and Bank of Canada records.

The loonie advanced to the strongest since 1999 versus the euro, touching C$1.2418, on speculation the global slowdown is gaining momentum. China’s economic growth slowed to an annual 7.7 percent last quarter, from 8.1 percent in the previous three months, a Bloomberg survey forecast.

Home Prices

Canada’s new home price index recorded its 14th straight gain, led by higher prices in Toronto, the government statistics agency said. Economists predicted the index would rise 0.2 percent, according to the median estimate in a Bloomberg survey with 10 responses.

Trading in overnight index swaps showed odds the Bank of Canada will leave its target rate at 1 percent at its July 17 policy meeting were about 98 percent, according to Bloomberg calculations.

The Canadian currency rose 1.2 percent to C$1.0333 versus the Australian dollar after the statistics bureau said in Sydney the number of people employed in the country fell by 27,000, almost erasing a revised 27,800 gain in May. The jobless rate rose for a second month, to 5.2 percent from 5.1 percent.

“Australian employment data was miserable, rumors swirl that Chinese GDP data will disappoint, while earnings, particularly in consumer discretionary and staples, have been surprisingly weak,” Camilla Sutton, chief currency strategist at Bank of Nova Scotia in Toronto, wrote in a note to clients today. “Most asset classes are favoring risk aversion, given evidence that the downside to global growth is not fully priced in.”

To contact the reporter on this story: 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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