By Chris Fournier and Ruby Madren-Britton Nov. 13 (Bloomberg) -- Canada’s dollar strengthened as a report showed the nation’s trade deficit narrowed more than forecast and speculation the global economic recovery is gathering momentum encouraged demand for higher-yielding assets. The Canadian currency headed for a second straight weekly gain against its U.S. counterpart. The U.S. trade deficit widened as the economy gained, and a European Union report showed the euro-area economy emerged in the third quarter from its worst recession since World War II. “It’s still the global themes driving the Canadian dollar,” said Matthew Strauss, a senior currency strategist in Toronto at Royal Bank of Canada, the nation’s largest lender. “There’s a slight increase in risk appetite after yesterday’s sell-off.” Canada’s dollar appreciated 0.3 percent to C$1.0525 per U.S. dollar at 10:27 a.m. in New York, from C$1.0557 yesterday. It touched C$1.0418 yesterday, the strongest level in three weeks, before depreciating 1 percent. The currency is poised for a weekly advance of 2.2 percent. One Canadian dollar buys 95.02 U.S. cents. The currency, nicknamed the loonie for the image of the aquatic bird on the C$1 coin, pared gains when stocks trimmed an advance after the Reuters/University of Michigan preliminary index of consumer sentiment unexpectedly dropped to 66 this month, from 70.6 in October. International Demand Canada’s trade deficit narrowed in September to its lowest level in three months on rising exports of automobiles and metals, Statistics Canada said today in Ottawa. The gap was C$927 million ($881 million), compared with a revised C$1.99 billion in August. Economists surveyed by Bloomberg News expected a deficit of C$1.8 billion, the median of 20 estimates. The U.S. trade deficit widened in September by the most in a decade, a Commerce Department report today showed. The gap grew 18 percent to $36.5 billion, the highest level since January, from a revised $30.8 billion in August, the department said. Imports from Canada and Mexico increased $1.3 billion as North American vehicle production picked up. The U.S. is Canada’s largest trading partner. The Canadian report suggested international demand for the nation’s goods is recovering after exports fell to their lowest level in 11 years in May. The Bank of Canada has said the country’s first recession since 1992 ended in the third quarter. Euro Area Recovery Gross domestic product in the economy of the 16 nations that use the euro rose 0.4 percent from the second quarter, when it fell 0.2 percent, the EU’s statistics office in Luxembourg said today. Economists had forecast the economy would grow 0.5 percent, according to the median of 34 estimates in a Bloomberg survey. The Canadian dollar is up 3 percent this month for the third-best performance against the greenback among the 16 most- actively traded currencies tracked by Bloomberg. The U.S. dollar declined against all major counterparts in November. U.S. stocks advanced as better-than-estimated earnings at Walt Disney Co. and Abercrombie & Fitch Co. overshadowed the unexpected slump in consumer confidence. The Standard & Poor’s 500 Index rose 0.3 percent after falling as much as 0.2 percent. To contact the reporters on this story: Chris Fournier in Montreal at cfournier3@bloomberg.net; Ruby Madren-Britton in New York at rmadrenbritt@bloomberg.net

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