By Chris Fournier Sept. 10 (Bloomberg) -- Canada’s dollar pared losses after the central bank reiterated concern that currency strength is a threat to faster-than-expected economic growth and held the benchmark interest rate at a record low. “They haven’t signaled any increased level of concern in the statement,” said Shaun Osborne, chief currency strategist in Toronto at TD Securities Inc., a unit of Canada’s second- biggest bank. “It probably means we’ll see a bit more strength.” The currency, nicknamed the loonie, weakened 0.7 percent to C$1.0860 at 10:28 a.m. in Toronto, from C$1.0785 yesterday, after falling as much as 0.9 percent, the most on an intraday basis since Sept. 1. One Canadian dollar buys 92.09 U.S. cents. “Persistent strength in the Canadian dollar remains a risk to growth,” Bank of Canada policy makers said in today’s statement. It echoed the statement after the bank’s July 21 meeting, which said a higher Canadian dollar “is significantly moderating the pace of overall growth.” The central bank left interest rates at a record low 0.25 percent, as all 21 economists in a Bloomberg News survey forecast. Bank Governor Mark Carney reiterated a pledge to hold borrowing costs there through June 2010, depending on the inflation outlook. ‘Built in Too Much’ “Everyone had built in too much from the Bank of Canada regarding the Canadian dollar,” said Steve Butler, director of foreign-exchange trading in Toronto at Scotia Capital Inc., a unit of Canada’s third-largest bank. Flows from mergers and acquisitions, as well as corporate demand, have been “supportive” of the U.S. dollar against the loonie, Butler said. Regina, Saskatchewan-based Viterra Inc., Canada’s largest grain handler, won support yesterday from shareholders of ABB Grain Ltd. for its A$1.6 billion ($1.4 billion) takeover bid. “A series of deals and equity issues with potentially negative implications for the loonie have emerged over the past several days,” Shane Enright, a currencies strategist at CIBC World Markets Inc. in Toronto, wrote in a note to clients today. Canada’s dollar was the third-worst performer against the greenback today among its 16 most-traded counterparts tracked by Bloomberg. The Australian dollar, which like Canada’s tends to rise and fall with commodity prices, dropped 0.6 percent against the U.S. currency. Crude oil for October delivery was at $71.93 a barrel in New York, swinging between gains and losses. Crude is Canada’s biggest export. Global stocks fell, and U.S. equities were little changed. Risk Positions Cut “Commodities have failed to break to new highs and momentum has been weak, while the data is globally less supportive for risk taking,” said Sebastien Galy, a currency strategist at BNP Paribas SA in New York. “We’re seeing a cutting of risk positions.” The loonie remained lower after Statistics Canada reported the nation posted an unexpected trade deficit in July as imports of energy products, cars and machinery rose faster than exports. The shortfall was C$1.43 billion ($1.32 billion), compared with a C$37 million surplus in June, the agency report said. A survey of economists by Bloomberg expected a C$100 million surplus in July, based on the median of 20 responses.

Source