BLBG: Canadian Currency Strengthens as Oil Exceeds $90 a Barrel to Two-Year High
Canada’s dollar rose toward a three- week high versus its U.S. counterpart as crude oil, the nation’s biggest export, exceeded $90 a barrel for the first time in more than two years.
The currency, nicknamed the loonie, remained higher after the Bank of Canada kept its benchmark interest rate at 1 percent for a second consecutive time, as economists forecast. The loonie also gained after U.S. President Barack Obama agreed to sustain tax cuts for high-income taxpayers while Irish lawmakers prepared to vote on austerity measures, spurring demand for assets related to economic growth.
“There is a lot of positive equity news, including the Bush tax-cut extension, and the Irish budget is likely to pass,” Mark McCormick, a currency strategist at Brown Brothers Harriman & Co. in New York, wrote via e-mail. “The Canadian dollar is highly correlated to equities and commodities, and when these assets perform well, the Canadian dollar does even better on a relative basis.”
The Canadian currency, nicknamed the loonie, appreciated 0.3 percent to C$1.0030 per U.S. dollar at 9:16 a.m. in Toronto, from C$1.0057 yesterday. One Canadian dollar buys 99.70 U.S. cents. The loonie touched C$1.0003 on Dec. 3, the strongest level since Nov. 11.
The Bank of Canada said it will remain careful about future interest-rate increases as falling exports and Europe’s sovereign debt crisis hinder the economic recovery. Its decision to hold the rate steady was anticipated by all 24 economists surveyed by Bloomberg News.
Three Increases
The central bank kept borrowing costs steady in October after three successive increases of a quarter-percentage point beginning June 1. It cited a weaker economic outlook for the U.S., Canada’s biggest trading partner.
Crude for January delivery rose as much as 1.5 percent to $90.76 a barrel, the highest level since October 2008. The MSCI World Index, a gauge of equities in developed countries, increased as much as 0.7 percent.
The loonie has rallied 5.1 percent this year, partly on demand for the nation’s raw materials, including gold, crude, copper, timber and wheat, which account for about half its export revenue. Canada was the first among Group of Seven nations to raise interest rates since July 2008.
The greenback fell today against most of its major counterparts including the Canadian currency on reduced demand for safety as Obama said he would agree to sustain tax cuts for high-income taxpayers enacted during the administration of former President George W. Bush in exchange for extending unemployment insurance and cutting the payroll tax by $120 billion for a year.
To contact the reporter on this story: Chris Fournier in Montreal at cfournier3@bloomberg.net
To contact the editor responsible for this story: Dave Liedtka at dliedtka@bloomberg.net
