BLBG: Canadian Dollar Advances to One-Week High on Buoyed Risk
By Allison Bennett
Feb. 10 (Bloomberg) -- Canada’s dollar advanced to a one-week high as stocks and crude oil erased losses, reviving demand for currencies tied to economic growth.
“Risk sentiment hasn’t been impaired, and the global growth backdrop remains optimistic,” said David Watt, senior currency strategist in Toronto at Royal Bank of Canada, the nation’s biggest bank. “That’s an overall positive environment for Canada.”
The loonie fell earlier as much as 0.5 percent as stocks and crude oil dropped after Federal Reserve Chairman Ben S. Bernanke said the discount rate may be raised “before long” and a German government official said European Union leaders will probably stop short of announcing aid for Greece tomorrow.
The Canadian currency appreciated 0.2 percent to C$1.0632 per U.S. dollar at 4:12 p.m. in Toronto, from C$1.0656 yesterday. It earlier touched C$1.0598, the strongest level since Feb. 4. One Canadian dollar buys 94.06 U.S. cents.
Crude oil for March delivery rose 0.1 percent to $74.45 a barrel after losing 1.6 percent. The Standard & Poor’s/TSX Composite Index gained 0.2 percent after falling 0.6 percent.
The Canadian dollar tends to track swings in stocks and commodity prices. The 30-day correlation for the loonie and crude oil is 0.65, while the figure for the S&P 500 Index is 0.77. Readings of 1 would indicate they move in lockstep.
Fed’s Discount Rate
The Fed may raise the discount rate charged on direct loans to commercial banks “before long” as part of the “normalization” of Fed lending, Bernanke said in testimony prepared for the House Financial Services Committee. The presentation was postponed because of a snowstorm.
Germany and France are leading talks to provide help for Greece under “tough pre-conditions,” said Markus Ferber, a member of German Chancellor Angela Merkel’s bloc in the European Parliament, citing discussions his group had with federal officials in Berlin.
“What kind of solution gets put forward to the problem will drive directional market sentiment,” said Shane Enright, a foreign-exchange strategist at Canadian Imperial Bank of Commerce in Toronto.
Government bonds fell, with the yield on Canada’s 10- year security rising six basis points, or 0.05 percentage point, to 3.43 percent. The price of the 3.75 percent security maturing in June 2019 dropped 44 cents to C$102.52.
Canada posted a wider-than-expected merchandise trade deficit in December, led by automobiles, and recorded the country’s first annual shortfall since 1975.
The monthly deficit totaled C$246 million ($231 million) after a revised C$201 million for November, Statistics Canada said today. The median forecast of 20 economists in a Bloomberg News survey was for a C$100 million deficit.
To contact the reporters on this story: Allison Bennett in New York at abennett23@bloomberg.net; Chris Fournier in Montreal at cfournier3@bloomberg.net
