BLBG: Canadian Dollar Falls for First Time in Four Days as Oil Drops
By Chris Fournier and Ruby Madren-Britton
Nov. 12 (Bloomberg) -- Canada’s currency weakened against its U.S. counterpart from the highest level in three weeks as gold retreated from a record and crude oil tumbled.
The Canadian dollar fell for the first time in four days, slipping against six of the 16 most-actively traded currencies tracked by Bloomberg. The U.S. dollar rose against all of the 16 but the South Korean won. Chinese Premier Wen Jiabao said the world faces an uneven economic recovery, discouraging demand for higher-yielding assets.
“The risk-averse tone is giving the U.S. dollar a boost,” said Jack Spitz, managing director of foreign exchange at National Bank of Canada in Toronto. The Canadian dollar is down along with other currencies on speculation that “gold is finding a peak,” he said.
Canada’s currency depreciated 0.6 percent to C$1.0510 per U.S. dollar at 12:22 p.m. in Toronto, from C$1.0449 yesterday. It touched C$1.0418 overnight, the strongest level since Oct. 22. One Canadian dollar buys 95.15 U.S. cents.
Government bonds fell, pushing up the yield on Canada’s benchmark 10-year note three basis points, or 0.03 percentage point, to 3.52 percent. The price of the 3.75 percent security due in June 2019 decreased 22 cents to C$101.83.
Canada sold C$3 billion ($2.9 billion) of two-year notes at an average yield of 1.608 percent. The government received bids of C$7.22 billion for the 1.5 percent notes maturing in March 2012, according to a statement on the Bank of Canada’s Web site.
‘Risk-Off Trading’
Gold declined as a stronger U.S. dollar prompted some investors to sell after the metal’s rally set a record. December gold futures fell 0.4 percent to $1,110.40 an ounce in New York after touching $1,123.40. Crude oil for December delivery dropped 2.5 percent to $77.32 a barrel on the New York Mercantile Exchange after touching $80.10 yesterday.
Raw materials account for more than half of Canada’s export revenue, and crude is the nation’s biggest export.
“Oil doesn’t seem to want to spend any time above $80 a barrel at the moment,” said Andrew Busch, a global currency strategist in Chicago at Bank of Montreal, Canada’s forth- largest bank. “We’re seeing risk-off trading and selling of the commodities.”
The Standard & Poor’s 500 Index slid 0.5 percent after rising earlier as much as 0.3 percent. The Canadian dollar, nicknamed the loonie for the image of the aquatic bird on the C$1 coin, tends to track movements in stocks and commodity prices.
The loonie, which gained 16 percent this year, fell 1.6 percent over the past month as Bank of Canada Governor Mark Carney reiterated comments that the currency’s strength threatened the nation’s economic recovery. The central bank on Oct. 20 held the benchmark interest rate at a record low 0.25 percent and said it would remain there until mid-2010, barring a shift in the inflation outlook.
“The Canadian dollar is starting to lag more compared to other commodity currencies when these commodity plays are being played in the market because of interest rates and the Bank of Canada’s dovish sentiment,” said John Corcoran, Toronto-based general manager at CanadianForex Ltd.
Canadian new-home prices rose 0.5 percent in September, the most since January 2008, Statistics Canada said today in Ottawa. Economists surveyed by Bloomberg predicted a monthly gain of 0.2 percent, based on the median of 15 estimates.
To contact the reporters on this story: Chris Fournier in Montreal at cfournier3@bloomberg.net; Ruby Madren-Britton in New York at rmadrenbritt@bloomberg.net
