Canadian Currency Strengthens as Stocks, Crude Oil Post Gains

By Matt Townsend

Aug. 18 (Bloomberg) -- Canada’s dollar gained against its U.S. counterpart for the first time in three days as stocks and oil rose amid speculation an economic recovery is taking shape.

The Canadian currency, nicknamed the loonie, strengthened 0.2 percent as futures on the Standard & Poor’s 500 Index rose after the benchmark sank the most yesterday in six weeks. The U.S. prepared to issue a report likely to show housing starts increased last month, according to a Bloomberg News survey of economists. The Dow Jones Stoxx 600 Index added 1 percent as German investor confidence grew more than estimated.

The loonie advanced to C$1.1070 per U.S. dollar at 8:19 a.m. in Toronto, from C$1.1086 yesterday, when it touched C$1.1125, the weakest level on an intraday basis since July 20. One Canadian dollar purchases 90.34 U.S. cents.

The Canadian currency posted its second straight weekly drop on Aug. 14 as losses in stocks and commodities overshadowed government reports that spurred speculation the recession may be easing. The currency, which rose 21 percent from early March through July, has weakened 3.3 percent since Aug. 4, when Canadian Finance Minister Jim Flaherty voiced concern about its appreciation and said “steps” could be taken to weaken it.

U.S. builders probably broke ground on homes in July at the fastest pace in eight months, a sign the housing market is healing as the economic contraction eases. Housing starts rose 2.7 percent to 599,000, the third straight increase, according to the median forecast of 70 economists in a Bloomberg survey. Another report may show wholesale prices fell in July as weak demand and lower energy costs kept inflation in check, a Bloomberg survey showed.

To contact the reporter on this story: Matt Townsend in New York at mtownsend9@bloomberg.net.
Last Updated: August 18, 2009 08:24 EDT