BLBG: Canadian Dollar Falls Toward Three-Month Low as Stocks Drop
By Chris Fournier
Feb. 8 (Bloomberg) -- Canada’s dollar slid toward a three- month low against its U.S. counterpart as a drop in stocks sapped demand for currencies tied to economic growth.
The currency, known as the loonie for the image of the aquatic bird on the C$1 coin, has declined 1.9 percent against the greenback in 2010 on concern the struggle of European nations to contain budget deficits and China’s move to discourage lending will slow the global recovery.
“We’re seeing a little weakness creeping into the C- buck,” said John Curran, a Toronto-based senior vice president at CanadianForex Ltd., an online foreign-exchange dealer. “Today should have been a day of retracement to take a breather on U.S. dollar strength, but that’s not the case. The risk is still for a stronger U.S. dollar.”
The Canadian currency declined 0.3 percent to C$1.0741 per U.S. dollar at 4:11 p.m. in Toronto, from C$1.0716 on Feb. 5, when it touched C$1.0781, the weakest level since Nov. 6. One Canadian dollar buys 93.10 U.S. cents.
The Standard & Poor’s 500 Index decreased 0.9 percent, while the S&P/TSX Composite Index lost 1 percent.
“The U.S. dollar will obviously be liable to rally further versus the Canadian dollar,” said Elsa Lignos, a currency strategist in London at Royal Bank of Canada, the nation’s biggest bank. The loonie “is currently being driven by global risk swings that override domestic considerations,” she said.
Housing Starts
Canada’s housing starts rose to 186,300 units in January from a revised 176,100 in the prior month, Canada Mortgage and Housing Corp. said in Ottawa. The median forecast of 19 economists in a Bloomberg survey was for an increase to 180,000 from a previously reported 174,500.
Government debt increased, with the yield on the 3.75 percent security due in June 2019 falling one basis point, or 0.01 percentage point, to 3.35 percent. The price of the 10-year bond advanced 8 cents to C$103.18.
RBC’s “risk appetite thermometer” moved from minus 7 three weeks ago, indicating a strong risk-seeking environment, to plus 7 at the end of last week, the most risk-averse level since December 2008, Lignos said.
“It’s not a landscape that sees the Canadian dollar outperforming,” said Jack Spitz, managing director of foreign exchange at National Bank of Canada in Toronto. The U.S. currency will likely rise toward near-term resistance at C$1.0750 should equities continue to “melt down,” according to Spitz. Resistance is a level where sell orders are clustered.
Group of Seven finance ministers meeting last week in Iqaluit, Canada, pledged to press ahead with economic stimulus measures even as investors intensify their focus on mounting budget deficits.
“We need to continue to deliver the stimulus to which we are mutually committed and begin looking at exit strategies to move to a more sustainable fiscal track,” Finance Minister Jim Flaherty told reporters on Feb. 6 after chairing a meeting of G- 7 counterparts and central bankers.
To contact the reporter on this story: Chris Fournier in Montreal at cfournier3@bloomberg.net
