BLBG: Canada’s Dollar Advances on Gain in Crude Oil, Inflation Report
By Chris Fournier
Nov. 18 (Bloomberg) -- Canada’s dollar gained against its U.S. counterpart as oil prices advanced and a government report showed consumer prices rose at an annual rate for the first time in five months.
“Inflation that looks like it will rise beyond the Bank of Canada’s 2 percent comfort level over the next year puts pressure on the bank to raise interest rates,” said Camilla Sutton, Toronto-based director of currency strategy at Bank of Nova Scotia, the nation’s third-biggest bank, before the report was released. That will “benefit the Canadian dollar.”
Canada’s currency gained 0.4 percent to C$1.0465 per U.S. dollar at 7:06 a.m. in Toronto, from C$1.0510 yesterday.
The consumer price index increased 0.1 percent last month from a year earlier after decreasing 0.9 percent in September, Statistics Canada said today in Ottawa. The gain matched the median forecast in a Bloomberg survey of 22 economists. The central bank’s inflation target is 2 percent.
Canada’s dollar, nicknamed the loonie for the image of the aquatic bird on the C$1 coin, has been the fifth-best performer this month against the greenback among the 16 most-traded currencies tracked by Bloomberg, trailing South Africa’s rand, the New Zealand dollar, the Swedish krona and the Australian currency. All five currencies are linked to commodity prices.
Currency traders are betting which countries will raise interest rates first as the global economy shows signs of emerging from the worst recession in more than half a century. Investors tend to favor the currencies of nations whose borrowing costs are rising because yields are higher.
Bank of Canada policy makers left the overnight lending rate at a record low 0.25 percent at their last meeting in October and reiterated a pledge to keep it there through June 2010 unless the inflation outlook changes. The rate was 4.5 percent when the bank began cutting it in December 2007. The next policy meeting is scheduled for Dec. 8.
To contact the reporter on this story: Chris Fournier in Montreal at cfournier3@bloomberg.net
