BLBG: Canadian Dollar Rises for Second Day as Oil, Equities Advance
By Allison Bennett
Feb. 2 (Bloomberg) -- Canada’s dollar appreciated for a second consecutive day as equities and crude oil rose, making the currencies of commodity producers more attractive.
The loonie rallied yesterday from C$1.0722, the weakest level since Dec. 18, on speculation its 1.6 percent decrease in January would be hard to sustain.
“The market sentiment from closing Friday to where we walked in yesterday changed dramatically,” said Steve Butler, director of foreign exchange at Bank of Nova Scotia in Toronto. “We’ll take a cue from equities today, so the Canadian dollar will trade in a bit of a range.”
The currency, nicknamed the loonie for the image of the aquatic bird on the C$1 coin, advanced 0.3 percent to C$1.0580 per U.S. dollar at 4:01 p.m. in Toronto, after appreciating 0.9 percent yesterday to C$1.0606 in the biggest gain since Jan. 4.
The seven-day relative strength index of the Canadian dollar was 18.81 on Jan. 29, the lowest since October 2008. Readings below 30 indicate a currency may recover.
Canadian government bonds increased today as Australia’s central bank unexpectedly held its target lending rate at 3.75 percent after three consecutive increases, encouraging demand for the government debt of commodity producers.
“The central bank’s lack of hawkish enthusiasm is bleeding through to the Canadian bond market,” said Eric Lascelles, chief economics and rates strategist at Toronto Dominion Bank in Toronto. “The market is fond of linking the Canadian dollar and Australian dollar.”
Canadian Debt
The yield on Canada’s 10-year security fell one basis point, or 0.01 percentage point, to 3.37 percent. The price of the 3.75 percent security due in June 2019 increased 12 cents to C$103.04. The rate reached 3.40 percent yesterday, the highest level since Jan. 22.
“Canadian government bonds are cheap right now,” said Daniel Fuss, vice chairman in Boston at Loomis Sayles & Co., in a Bloomberg Radio interview. “They’re cheap on the expectation of better position on the budget and inflows of money heading into Canada because of that.” Fuss’s portfolio has a little more than 15 percent invested in Canadian government debt.
Prime Minister Stephen Harper pledged last week at the World Economic Forum in Davos, Switzerland, that the next federal budget will include a deficit-reduction plan.
The yield on the two-year note dropped five basis points to 1.29 percent. The cost of the 1.5 percent security due in March 2012 climbed 9 cents to C$100.43.
Aussie Rate View
All 20 economists in a Bloomberg News survey predicted the Reserve Bank of Australia would increase the overnight cash rate target by a quarter-percentage point to 4 percent.
Crude oil for March delivery rallied for a second straight day, climbing 3.8 percent to $77.28 a barrel. Raw materials account for half of Canada’s export revenue. The Canadian dollar fell last month as crude tumbled from a one-year high of $83.95 a barrel reached Jan. 11.
The Standard & Poor’s 500 Index gained 1.3 percent today and the S&P/TSX Composite Index, Canada’s benchmark of equities, advanced 0.8 percent.
To contact the reporter on this story: Allison Bennett in New York at abennett23@bloomberg.net
