BLBG: Canada’s Dollar Weakens as Investor Risk Aversion Increases
By Chris Fournier
Dec. 17 (Bloomberg) -- Canada’s dollar declined to a three- week low versus its U.S. counterpart as a drop in global stocks reduced demand for commodity-linked currencies.
The dollar remained lower after a government report showed consumer prices rose at a 1 percent annual pace in November, the fastest in eight months, as a slump in gasoline costs linked to the global recession ended.
“It’s still the global-equities, risk-off picture that’s leading the way today,” said JP Blais, vice president of foreign exchange in Toronto at Bank of Montreal, Canada’s fourth-largest lender. “That’s making the U.S. dollar stronger across the board.”
The Canadian currency, nicknamed as the loonie for the image of the water fowl on the C$1 coin, weakened 1.1 percent to C$1.0726 per U.S. dollar at 7:23 a.m. in Toronto, from C$1.0613 yesterday. It touched C$1.0738, the weakest since Nov. 27. One Canadian dollar buys 93.24 U.S. cents.
Retail gasoline prices were 14 percent higher than a year earlier, compared with October’s annual decline of 13 percent, Statistics Canada said today in Ottawa. Housing was the only major component of eight to decline in November. Economists surveyed by Bloomberg News had expected overall inflation to gain 0.8 percent, based on the median of 22 forecasts.
“Any uptick in inflation like we’re seeing today would bring the first interest-rate move by Canada a little bit closer,” said Blais. “That would definitely be a positive for the Canadian dollar. If we were to move it would make Canada more attractive on a fixed-income basis.”
Bank of Canada Governor Mark Carney repeated yesterday he plans to keep his benchmark interest rate at a record low 0.25 percent through June to help stimulate demand and bring inflation back to the 2 percent target in the second half of 2011. Lower gasoline prices drove the inflation rate below zero for four straight months through September, the longest period since 1953.
To contact the reporter on this story: Chris Fournier in Montreal at cfournier3@bloomberg.net
