By Chris Fournier Aug. 10 (Bloomberg) -- Canada’s dollar weakened for a third day as declines in global stocks and crude oil signaled risk appetite may be waning and investors speculated the government believes the currency strengthened too much. “Short-term, equities are the obvious directional driver,” said Adam Cole, London-based global head of currency strategy at RBC Capital Markets Inc. The unit of Canada’s biggest bank last week revised its Canadian-dollar forecast to C$1.09 by year-end, from C$1.14 previously. The Canadian currency, nicknamed the loonie, depreciated 0.7 percent to C$1.0886 per U.S. dollar at 4:39 p.m. in Toronto, from C$1.0813 on Aug. 7. It reached a 10-month high of C$1.0633 on Aug. 4. One Canadian dollar buys 91.86 U.S. cents. The loonie gained 6.9 percent over the past month against the U.S. dollar in the fifth-best performance among the 16 most- traded currencies tracked by Bloomberg. The dollars of Australia and New Zealand, which like Canada’s tend to rise and fall with stocks and commodity prices, gained 7.6 percent and 7.9 percent, respectively. The Standard & Poor’s 500 Index declined 0.3 percent, slipping from a 10-month high. Crude oil for September delivery fell as much as 1.2 percent to $70.09 a barrel on the New York Mercantile Exchange, before closing little changed from Aug. 7 at $70.92. Raw materials account for more than half of Canada’s export revenue, and crude is the nation’s biggest export. “We think the near-term bias is for the U.S. dollar to move higher against the Canadian dollar before it reverts to its downward trend,” said Camilla Sutton, director of currency strategy at Scotia Capital Inc. in Toronto. “With no major data releases, the Canadian dollar should take its clues from broader market movements.” Flaherty’s ‘Steps’ The Canadian currency has gained 12 percent this year, squeezing exporters’ profits and prompting Finance Minister Jim Flaherty to voice concern last week about its “rapid” appreciation and say “steps” could be taken to weaken it, though he didn’t elaborate. Statistics Canada on Aug. 7 reported job losses in July that were almost triple what economists on average forecast. “There is a stronger perception in Canada that policy makers don’t want the currency to be stronger,” said RBC’s Cole. “The floor that Flaherty’s comments last week put in place leaves the Canadian dollar as an underperformer.” A currency-market intervention by the Bank of Canada to weaken the nation’s dollar would be successful, following a similar move by the Swiss National Bank, said the head of foreign exchange at Canada’s biggest pension-fund manager. ‘Quite Feasible’ “It’s quite feasible for intervention to have a lot of success in this context,” Maxime Tessier of Montreal-based Caisse de Depot et Placement du Quebec said in a telephone interview. Intervening “may convince a number of market players they should focus on some other currency if they want to bet against the U.S. dollar.” The Swiss National Bank cut interest rates and began buying foreign currencies on March 12, causing the franc to drop the most that day against the euro since the introduction of the common currency in 1999. The franc is down 3.6 percent against the euro since then. The loonie will weaken to C$1.11 by the year-end, according to the median forecast of 36 economists and analysts surveyed by Bloomberg News. Government bonds rose, pushing the 10-year note’s yield down six basis points, or 0.06 percentage point, to 3.55 percent. The price of the 3.75 percent security maturing in June 2019 climbed 51 cents to C$101.64. Canadian government debt lost investors 2.4 percent this year, according to a Merrill Lynch index. The nation’s statistics agency is scheduled to release its international merchandise trade report on Aug. 12 and reports on manufacturing and motor vehicle sales on Aug. 14. Canada Mortgage and Housing Corp. is due to report on housing starts tomorrow. To contact the reporter on this story: Chris Fournier in Montreal at cfournier3@bloomberg.net

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