Canadian Dollar Rises to Highest Since November as Stocks Gain

By Chris Fournier

May 4 (Bloomberg) -- Canada’s dollar advanced to the highest level since November as speculation the worst of the global economic crisis is over boosted the appeal of currencies that would benefit from renewed growth.

“Commodity currencies can continue to do well as we come out of the worst of the production-cycle downturn,” said Daniel Katzive, a senior currency strategist at Credit Suisse Group AG in New York. “We’re cautiously optimistic on the Canadian dollar.”

The Standard & Poor’s 500 Index rose 3.4 percent to 907.24 after its biggest monthly advance in nine years, as pending home resales in the U.S. unexpectedly rose. Canada’s dollar, a proxy for risk appetite, tends to track movements in equities.

The Canadian currency, known as the loonie, appreciated 1 percent to C$1.1734 per U.S. dollar at 4:03 p.m. in Toronto, from C$1.1852 last week. It touched C$1.1733, the strongest level since Nov. 10. One Canadian dollar buys 85.22 U.S. cents.

Canada’s dollar appreciated since March 9, when it reached the lowest since September 2004, as investors ventured out of havens such as the U.S. dollar into higher-yielding assets. A decision last month by the country’s central bank not to immediately print money to buy assets added to the currency’s allure.

Stress tests on the biggest U.S. banks by the Federal Reserve, originally scheduled for release today, will be disclosed after U.S. markets close on May 7, according to a government official who spoke on condition of anonymity.

‘Regime Shift’

“We are in a phase of regime shift,” said Sebastien Galy, a currency strategist at BNP Paribas Securities SA in New York. “It looks like flow is now piling into the risk-selling trade. The last peg should be the U.S. stress tests.”

The U.S. and Canada will release reports the day after the stress test findings that are forecast to show employers cut fewer jobs.

Canada’s dollar will weaken to C$1.24 by the end of this year, according to the median forecast of 36 economists and analysts surveyed by Bloomberg News.

“Although downside risks to the Canadian dollar have eased in recent weeks, the green shoots have yet to take root,” David Watt, senior currency strategist at RBC Capital Markets in Toronto, wrote in a note to clients today. “A nasty reversal in the U.S. dollar-Canadian dollar cross is quite possible.”

Watt said his outlook “reflected concerns about the global economy and the potential for double-digit declines in global trade in 2009.”

The emergence of a “bullish butterfly pattern” in the hourly charts at a previously established daily support level indicates investors should buy the U.S. dollar against the Canadian dollar, according to Roger Stojsic, technical analysts at FX 360 in Chicago.

Butterfly patterns, which resemble ‘M’ shapes on price charts, are found only at significant tops and bottoms of currency trends, according to FX 360’s Web site.

To contact the reporter on this story: Chris Fournier in Montreal at cfournier3@bloomberg.net

Last Updated: May 4, 2009 16:06 EDT