Canada’s dollar declined for the first time in four weeks against its U.S. counterpart as oil tumbled and concern increased that the global economy may be slowing, damping investor appetite for higher-yielding assets.
The currency fell against the majority of its 16 most- traded peers as Canada’s inflation rate unexpectedly slowed for a second month, dimming the outlook for higher interest rates. Canada’s dollar declined on Sept. 20 the most in eight weeks after economic reports from the U.S., Europe and China indicated growth may be slowing. Canada’s gross domestic product is forecast to grow at 0.1 percent pace in July, down from 0.2 percent in June, according to a Bloomberg survey due Sept. 28.
“The global backdrop is in a precarious spot,” Mazen Issa, Canada macro strategist at Toronto-Dominion Bank (TD)’s TD Securities, said yesterday in a phone interview. “Growth is expected to slow in the second half of the year, and so far the data in July has been reaffirming that that is the case.”
Canada’s currency, nicknamed the loonie for the image of the aquatic bird on the C$1 coin, fell 0.5 percent this week to 97.64 cents per U.S. dollar in Toronto. One Canadian dollar buys $1.0242.
The loonie declined with crude-oil futures, which dropped 6 percent to $93.04 per barrel in New York, the biggest slump since the five days ended May 4.
Canadian government bonds rose, with the yield on the 10- year benchmark note falling 12 basis points, or 0.12 percentage point, to 1.85 percent.
The consumer price index rose 1.2 percent in August from a year ago compared with a 1.3 percent gain the prior month, Statistics Canada said yesterday from Ottawa. The core rate, which excludes eight volatile products, increased 1.6 percent after a July gain of 1.7 percent. Economists surveyed by Bloomberg forecast that the total rate would stay at 1.3 percent and core inflation would be 1.5 percent.
Bank of Canada Governor Mark Carney on Sept. 5 held his key lending rate at 1 percent, where it’s been since September 2010, the longest unchanged period since the 1950s. Carney reiterated that an increase “may become appropriate” as domestic spending props up an economic recovery restrained by weak global demand for exports.
The loonie declined as euro-area services and manufacturing output fell to a 39-month low in September and China’s manufacturing probably contracted for an 11th month. An index of U.S. leading economic indicators slid in August and manufacturing in the Philadelphia region shrank for a fifth straight month in September.
“There’s been a deluge of negative economic reports coming out from the major industrial centers,” Ravi Bharadwaj, a market analyst in Washington at Western Union Business Solutions, a unit of Western Union Co. (WU:US), said yesterday in a telephone interview. “Broader views don’t seem to be suggesting that an eccentric pro-risk position is prudent.”
The difference in the number of wagers by hedge funds and other large speculators on an advance in the Canadian dollar compared with those on a drop, known as net longs, rose to 111,881 contracts in the five days ended on Sept. 18, up from net longs of 101,860 a week earlier, according to Commodity Futures Trading Commission data compiled by Bloomberg.
Canada’s dollar has declined 0.8 percent this month, the third most among 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Currency Indexes, after the greenback’s 2.2 percent drop and the Australian dollar’s 2.5 percent tumble. The euro has advanced 2.2 percent to lead gainers.
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