Bloomberg News

Canada Dollar Gains for 2nd Day as Business Gauge Rises

January 07, 2013

The Canadian Dollar rose for a second day against its U.S. counterpart after a measure of business activity expanded more than forecast in December, adding to signals of faster economic growth.

The currency strengthened after Canada’s Ivey purchasing managers’ index was 52.8 in December, following a November reading of 47.5, according to a statement on the website of Western University’s business school. Canada’s dollar posted its biggest gain versus the greenback in almost five months last week as employers in December added almost twice the number of jobs forecast.

“It’s a sign that the recovery that’s burgeoning in the U.S. is starting to spill over the border, or at least optimism over the U.S. recovery is encouraging factories to ramp up production or hiring,” Adam Button, a currency analyst at Forexlive.com, said by phone from Montreal. “Everywhere you look, it seems you find good news in terms of the U.S. and Canadian economy.”

The loonie, as the Canadian dollar is known for the image of the aquatic bird on the C$1 coin, rose 0.1 percent against its U.S. counterpart to 98.59 cents per U.S. dollar at 5:03 p.m. in Toronto. One Canadian dollar buys $1.0143.

Oil, Stocks

Crude oil, Canada’s largest export, rose 0.2 percent to $93.30 per barrel. The Standard & Poor’s 500 Index declined 0.3 percent.

A gauge of volatility hovered at almost the lowest in two weeks. Implied volatility for three-month options on the U.S. dollar versus the loonie touched 5.46 percent, the lowest since Dec. 21.

The country’s 10-year bond yield was little changed at 1.94 percent. The 2.75 percent security due in June 2022 traded at C$106.94.

The Bank of Canada said it will sell C$3.4 billion ($3.5 billion) of five-year notes on Jan. 9. The 1.25 percent securities will mature in March 2018. It will announce further details of a two-year note sale on Jan. 10.

Canada’s Ivey index rose for the first time in five months Economists had forecast a reading of 49.8. Readings of more than 50 indicate purchasing by governments and companies advanced.

Business Pace

“It was a pleasant surprise, it did put Canada back into expansionary territory,” said Camilla Sutton head of currency strategy at Bank of Nova Scotia (BNS) by phone from Toronto. “What we’ve seen out of PMIs this round has been most of North America, Asia and Latin America have been expansionary, with Europe and Japan still contracting, and much of it contracting at faster rates. Today’s Ivey sort of falls in line with that.”

Employers added 39,800 workers to payrolls in December, lowering the unemployment rate to 7.1 percent from 7.2 percent the previous month, Statistics Canada said Jan. 4 in Ottawa.

The loonie traded close to a level reached Jan. 2, when it gained the most in more than three months, after lawmakers in the U.S. avoided automatic austerity measures by agreeing to raise taxes on the wealthy and putting off decisions on spending cuts.

“You’re waiting for the next shoe to fall,” David Tulk, chief macro strategist at Toronto-Dominion Bank (TD)’s TD Securities unit, said by phone from Toronto. “A lot of the fiscal-cliff information has already been absorbed into the market and we’re not quite out of the woods yet there either -- negotiations on the spending side are ongoing.”

Canada’s currency has gained 0.9 percent during the past 12 months versus nine developed-nation peers tracked by Bloomberg Correlation-Weighted Indexes. The greenback has dropped 3.7 percent.

To contact the reporter on this story: Ari Altstedter in Toronto at aaltstedter@bloomberg.net

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


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