BLBG: Canada Dollar ’Tests’ High as Oil Nears Strongest in 14 Months
By Chris Fournier
Jan. 8 (Bloomberg) -- Canada’s currency gained as crude oil, the nation’s biggest export, rose to almost a 14-month high amid a tumble by the greenback against most of its major counterparts.
The Canadian dollar registered a weekly advance as oil came within five cents of the highest level since October 2008 and copper, another of the nation’s exports, traded near the strongest in 16 months. A weakening greenback bolsters demand for commodities as an alternate investment.
Canada’s currency, nicknamed the loonie for the image of the waterfowl on the C$1 coin, appreciated 0.5 percent to $1.0298 per U.S. dollar at 5 p.m. in Toronto, compared with C$1.0347 yesterday, when it reached C$1.0292, the strongest intraday level since Oct. 20. It touched C$1.0295 today and gained 2.2 percent for the week. One Canadian dollar purchases 97.11 U.S. cents.
Government bonds climbed, with the yield on the two-year security dropping seven basis points, or 0.07 percentage point, to 1.31 percent. It plunged as much as nine basis points to 1.30 percent, the lowest level since Dec. 18. The price of the 1.25 percent bond due in December 2011 rose 13 cents to C$99.88.
“The Canadian dollar is testing levels below C$1.03 because of broad-based U.S. dollar weakness,” said Matthew Strauss, a senior currency strategist in Toronto at Royal Bank of Canada, the nation’s biggest lender. “Commodities are still providing a very strong backdrop for the Canadian dollar.”
Job Losses
The loonie earlier fell after government reports showed employers unexpectedly cut jobs last month in both the U.S. and Canada. American payrolls shed 85,000 positions, compared with a median forecast in a Bloomberg News survey of no jobs cut, and the Canadian economy lost 2,600 positions, compared with a forecast gain of 20,000.
Crude oil for February delivery rose as much as 1 percent to $83.47 a barrel on the New York Mercantile Exchange before trading up 0.3 percent at $82.89. It touched $83.52 on Jan. 6, the highest price in 14 months.
“Crude remains close to cyclical highs,” said RBC’s Strauss. “Global factors continue to support commodity currencies.”
Copper for March delivery touched $3.544 a pound yesterday, the highest price since August 2008. It traded today at $3.431 on the New York Mercantile Exchange’s Comex unit. Raw materials including oil and copper account for half of Canada’s export revenue.
The U.S. dollar dropped against all but one of the 16 most- traded currencies tracked by Bloomberg, Taiwan’s dollar. The loonie fell against 12 of the currencies. It declined 0.3 percent against the euro, to C$1.4843, and dropped 0.3 percent to 89.97 yen.
Betting on Rates
Currency traders are betting on when countries will raise interest rates as the global economy shows signs of emerging from the worst recession in more than half a century. Investors tend to favor currencies of nations whose borrowing costs are rising because yields are higher.
Bank of Canada policy makers left the benchmark overnight lending rate at a record low 0.25 percent at their last meeting in December and reiterated a pledge to keep it there through June, barring a change in the inflation outlook.
The central bank will probably boost the rate to 0.5 percent in the second quarter and 0.75 percent in the third quarter, according to economists in a Bloomberg survey. The Federal Reserve will probably raise the benchmark U.S. rate to 0.5 percent in the third period, from virtually zero now, according to another survey.
The Bank of Canada’s next policy meeting is scheduled for Jan. 19.
Canada sold 2 billion euros ($2.9 billion) of 10-year bonds this week, its first issue of debt in the European currency in more than a decade, the finance department said today in a statement on its Web site.
To contact the reporter on this story: Chris Fournier in Montreal at cfournier3@bloomberg.net
By Chris Fournier
Jan. 8 (Bloomberg) -- Canada’s currency gained as crude oil, the nation’s biggest export, rose to almost a 14-month high amid a tumble by the greenback against most of its major counterparts.
The Canadian dollar registered a weekly advance as oil came within five cents of the highest level since October 2008 and copper, another of the nation’s exports, traded near the strongest in 16 months. A weakening greenback bolsters demand for commodities as an alternate investment.
Canada’s currency, nicknamed the loonie for the image of the waterfowl on the C$1 coin, appreciated 0.5 percent to $1.0298 per U.S. dollar at 5 p.m. in Toronto, compared with C$1.0347 yesterday, when it reached C$1.0292, the strongest intraday level since Oct. 20. It touched C$1.0295 today and gained 2.2 percent for the week. One Canadian dollar purchases 97.11 U.S. cents.
Government bonds climbed, with the yield on the two-year security dropping seven basis points, or 0.07 percentage point, to 1.31 percent. It plunged as much as nine basis points to 1.30 percent, the lowest level since Dec. 18. The price of the 1.25 percent bond due in December 2011 rose 13 cents to C$99.88.
“The Canadian dollar is testing levels below C$1.03 because of broad-based U.S. dollar weakness,” said Matthew Strauss, a senior currency strategist in Toronto at Royal Bank of Canada, the nation’s biggest lender. “Commodities are still providing a very strong backdrop for the Canadian dollar.”
Job Losses
The loonie earlier fell after government reports showed employers unexpectedly cut jobs last month in both the U.S. and Canada. American payrolls shed 85,000 positions, compared with a median forecast in a Bloomberg News survey of no jobs cut, and the Canadian economy lost 2,600 positions, compared with a forecast gain of 20,000.
Crude oil for February delivery rose as much as 1 percent to $83.47 a barrel on the New York Mercantile Exchange before trading up 0.3 percent at $82.89. It touched $83.52 on Jan. 6, the highest price in 14 months.
“Crude remains close to cyclical highs,” said RBC’s Strauss. “Global factors continue to support commodity currencies.”
Copper for March delivery touched $3.544 a pound yesterday, the highest price since August 2008. It traded today at $3.431 on the New York Mercantile Exchange’s Comex unit. Raw materials including oil and copper account for half of Canada’s export revenue.
The U.S. dollar dropped against all but one of the 16 most- traded currencies tracked by Bloomberg, Taiwan’s dollar. The loonie fell against 12 of the currencies. It declined 0.3 percent against the euro, to C$1.4843, and dropped 0.3 percent to 89.97 yen.
Betting on Rates
Currency traders are betting on when countries will raise interest rates as the global economy shows signs of emerging from the worst recession in more than half a century. Investors tend to favor currencies of nations whose borrowing costs are rising because yields are higher.
Bank of Canada policy makers left the benchmark overnight lending rate at a record low 0.25 percent at their last meeting in December and reiterated a pledge to keep it there through June, barring a change in the inflation outlook.
The central bank will probably boost the rate to 0.5 percent in the second quarter and 0.75 percent in the third quarter, according to economists in a Bloomberg survey. The Federal Reserve will probably raise the benchmark U.S. rate to 0.5 percent in the third period, from virtually zero now, according to another survey.
The Bank of Canada’s next policy meeting is scheduled for Jan. 19.
Canada sold 2 billion euros ($2.9 billion) of 10-year bonds this week, its first issue of debt in the European currency in more than a decade, the finance department said today in a statement on its Web site.
To contact the reporter on this story: Chris Fournier in Montreal at cfournier3@bloomberg.net
