BLBG: Canadian Currency Appreciates for Fifth Day as Crude Oil Climbs
Canada’s currency strengthened to the highest level since August 2008 after crude oil, the nation’s largest export, climbed above $75 a barrel and the U.S. dollar slumped.
“Oil certainly is a driver of Canadian-dollar strength,” said Christian Lawrence, a foreign-exchange strategist in London at RBC Capital Markets, a unit of Canada’s biggest bank. “U.S. dollar weakness has also been a driver of today’s move.”
Canada’s dollar has a 68 percent probability of reaching parity with the greenback by year-end, up from 61 percent yesterday, according to implied volatility from options trading monitored by Bloomberg. It last traded at C$1 per U.S. dollar in July 2008.
The Canadian currency, appreciating for the fifth straight day, gained as much as 0.6 percent to C$1.0253 per U.S. dollar, the strongest level since Aug. 1, 2008, and was up 0.3 percent to C$1.0286 at 10:09 a.m. in Toronto. It closed yesterday at C$1.0319. One Canadian dollar buys 97.22 U.S. cents.
Imports by China, the world’s largest user of industrial metals, declined in September by the least in 11 months. Canada generates more than half of its export revenue from raw materials including copper and gold. Chinese imports fell 3.5 percent last month from a year earlier, the customs bureau said on its Web site today. Imports from Canada rose 5.8 percent from a year earlier, the first gain in at least seven months.
‘Favorable’ Environment
The data “helps paint the picture of a favorable, medium- term environment for the Canadian dollar,” said Stephen Gallo, head of market analysis at Schneider Foreign Exchange in London. Canada’s currency is also benefiting from “the general level of risk appetite that we are seeing, triggered by China’s strong imports data and good corporate earnings.”
The Standard & Poor’s 500 Index, the benchmark for U.S. stocks, rose 1 percent after Intel Corp.’s sales forecast and earnings from JPMorgan Chase & Co. beat analysts’ estimates.
Crude oil for November delivery rose as much as 1.7 percent to $75.40 a barrel, the highest since Oct. 21, 2008, on the New York Mercantile Exchange. Canada is the biggest supplier of crude to the U.S., the world’s largest economy.
A break by oil through “strong resistance” at about $75 a barrel could spark a rally in the resource and push the Canadian dollar “one step closer to parity” with the U.S. dollar, RBC’s Lawrence said in a separate research note today. Resistance refers to the upper boundary of a trading range, where sell orders may be clustered.
Best Performer
The loonie, as Canada’s dollar is nicknamed for the aquatic bird on the C$1 coin, was the best performer over the past five days versus the greenback among the 16 most-traded currencies tracked by Bloomberg, gaining 3.2 percent. It’s the fifth-best performer over the past month, behind Norway’s krone, Australia’s dollar, Brazil’s real and New Zealand’s dollar. All five countries rely on commodities for export revenue.
The U.S. currency tumbled today against 15 of the 16 major currencies.
The difference, or spread, between the overnight index swap and the Bank of Canada’s 0.25 percent key interest rate widened today to 0.205, the most since June 2008, according to Bloomberg data, indicating traders are the most bullish on interest-rate increases since the credit crisis began.
Canadian sales of new motor vehicles fell by a seasonally adjusted 0.3 percent in August after a revised 5.2 percent increase in July as households purchased fewer North American- built passenger cars, Statistics Canada said today in Ottawa. Economists surveyed by Bloomberg News predicted sales would be unchanged, according to the median of 17 estimates.
