BLBG:Canadian Dollar Gains on Risk Appetite in Longest Win Streak Since October
Canada’s dollar advanced for a fourth week against its U.S. counterpart, its longest stretch of wins since October, as stronger economic data from the nation’s biggest trade partner helped fuel appetite for riskier assets.
The currency reached the strongest level in more than three months yesterday as the U.S. jobless rate fell to its lowest since 2009 and stocks climbed. Stronger manufacturing data from China to Europe to America also stoked demand for higher- yielding assets. Yields on Canada’s two-year government notes rose before the government sells C$3.5 billion ($3.5 billion) of the securities next week.
“As long as the U.S. machine is turning higher, it will trickle down toward Canada,” said Rahim Madhavji, president and head trader at Knightsbridge Foreign Exchange in Toronto. “Going into next week, we will continue to see a strong risk-on environment.”
The Canadian currency, nicknamed the loonie for the image of the aquatic bird on the C$1 coin, appreciated 0.9 percent to 99.34 cents per U.S. dollar yesterday in Toronto, from C$1.0018 on Jan. 27. It was the longest winning streak since the four weeks ended Oct. 28. The loonie touched 99.28 cents yesterday, the most since Oct. 31. One Canadian dollar buys $1.0066.
The Standard & Poor’s 500 Index extended its best start to a year since 1987, rising 1.5 percent yesterday and gaining 2.2 percent in its fifth straight weekly increase.
U.S. Jobs
The loonie climbed yesterday as government data in Washington showed payrolls in the U.S., the world’s largest economy, swelled by 243,000 jobs last month, following a revised increase of 203,000 in December. The median forecast in a Bloomberg News survey was for a gain of 140,000. The unemployment rate fell to 8.3 percent, from 8.5 percent.
U.S. service industries, which account for about 70 percent of the economy, expanded in January more than forecast, the Institute for Supply Management’s non-manufacturing index showed yesterday. U.S. manufacturing grew last month at the fastest pace in seven months, the ISM’s factory report showed on Feb. 1.
Yesterday’s data cast doubt on the Federal Reserve’s pledge to hold its key interest rate at virtually zero until late 2014 and fueled optimism the American economy is weathering Europe’s sovereign-debt crisis.
Canada’s currency strengthened yesterday beyond its 200-day moving average against the greenback for the first time since September. In technical analysis, the use of charts to predict currency moves, surpassing a moving average is a signal an asset may continue to rise.
‘Risk-On Sentiment’
“Canada’s major trading partner had data that came out that was very positive, and that has impacted a risk-on sentiment,” said David Watt, senior currency strategist at Royal Bank of Canada’s RBC Capital Markets unit in Toronto. “The data provided a positive backdrop that gave it the impetus to push through that 200-day moving average.”
The loonie may advance now to 98.92 Canadian cents per dollar and then to 98 cents, Watt said.
Canada sells about 75 percent of its exports to the U.S., accounting for about 25 percent of its C$1.7 trillion gross domestic product. The nation is the biggest supplier of energy to the U.S.
The loonie snapped a two-week losing streak against the euro, appreciating 1.3 percent to C$1.3071, the most this year, as Greece, its private creditors and international authorities struggled over a second bailout. The European Central Bank is considering using its bond holdings to bolster Greece’s next rescue program and support efforts to contain Europe’s debt crisis, three euro-region officials said yesterday.
China, Germany
Canada’s dollar also gained this week as factory purchasing-manager gauges increased for China and Germany, boosting speculation the global economy is improving. A composite index for manufacturing and services in the euro area also strengthened, Markit Economics said yesterday in a report.
Canadian government bonds fell, pushing yields on two-year notes up four basis points, or 0.04 percentage point, to 1.04 percent, from 1 percent on Jan. 27. The price of the 1 percent securities due in February 2014 decreased 10 cents to C$99.93.
The government will auction two-year debt on Feb. 8, according to a statement on the Bank of Canada’s website. The 0.75 percent securities are due in May 2014.
Gains by the Canadian dollar this week were tempered by government data that showed the nation’s unemployment rate rose and its economy unexpectedly contracted. The loonie initially fell yesterday as a report said the jobless rate rose to 7.6 percent in January, from 7.5 percent the previous month, and employers added a net 2,300 jobs. Economists surveyed by Bloomberg had forecast the unemployment rate would hold steady and that 22,000 positions would be added.
Canadian GDP
Canada’s gross domestic product shrank in November for the first time in six months, contracting 0.1 percent, on maintenance shutdowns by crude-oil producers and lower natural- gas extraction. The data was issued Jan. 31.
Business and government spending growth slipped in January from a seven-month high, economists in another Bloomberg poll forecast before the Ivey purchasing managers index is released Feb. 6. The gauge declined to 59.7, from 63.5 in December, according to the median estimate in the survey.
Canada’s dollar gained 2.5 percent over the past three months against nine developed-nation counterparts monitored by Bloomberg Correlation-Weighted Currency Indexes. The U.S. dollar rose 1 percent, while the euro dropped 4.4 percent. The New Zealand and Australian dollars were the top performers, climbing 6.7 percent and 4.9 percent.
To contact the reporters on this story: Chris Fournier in Halifax, Nova Scotia, at cfournier3@bloomberg.net; Austen Sherman in New York at asherman18@bloomberg.net
To contact the editor responsible for this story: Dave Liedtka at dliedtka@bloomberg.net
