Canadian Dollar Heads for Loss; Government Announces Bond Plan

By Matt Townsend


Aug. 28 (Bloomberg) -- Canada’s dollar headed for a weekly loss as most U.S. stocks fell today and the government said it will sell up to $3 billion of U.S. dollar bonds to lift foreign- exchange reserves and support the International Monetary Fund.

“There’s a lot of discussion today about this Canadian bond issuance,” said Andrew Busch, a global currency strategist at BMO Capital Markets in Chicago. “We are in the throes of August, and so many times small things like this have a tendency to be overplayed.”

The Canadian currency was little changed at C$1.0892 per U.S. dollar at 12:52 p.m. in Toronto, from C$1.0877 yesterday. For the week, it depreciated 0.8 percent. One Canadian dollar buys 91.81 U.S. cents.

The U.S.-dollar bond plan was announced by Finance Minister Jim Flaherty on his department’s Web site. It will “prudently diversify the government’s sources of foreign currency financing,” the statement said.

“It might be misinterpreted,” BMO’s Busch said. “I don’t think there is a lot to it.”
Statistics Canada said the nation posted a record current- account deficit for the second quarter. The report came three days after Bank of Canada Deputy Governor Timothy Lane said stagnant trade due to a stronger currency and sluggish demand is the biggest threat to economic recovery. The loonie rose 12 percent against the U.S. dollar this year through yesterday.

To contact the reporter on this story: Matt Townsend in New York at mtownsend9@bloomberg.net
Last Updated: August 28, 2009 12:58 EDT