Canadian Currency Advances on Week’s Gains by Stocks, Crude Oil

By Chris Fournier

Sept. 11 (Bloomberg) -- Canada’s dollar posted a second straight weekly gain as crude oil rose and the benchmark U.S. stock index touched the highest this year, burnishing the appeal of currencies tied to growth.

The Canadian currency, nicknamed the loonie after the image of the aquatic bird on the C$1 coin, appreciated 1.2 percent since Sept. 4, the biggest weekly gain since mid-August. The U.S. dollar fell this week against all 16 most-traded currencies tracked by Bloomberg.

“The tide has turned aggressively against the U.S. dollar,” said Stephen Gallo, head of market analysis at Schneider Foreign Exchange in London. “Equities made new 2009 highs and oil has been resilient as well,” which helped the Canadian dollar strengthen, he said.

Canada’s currency was little changed at C$1.0767 per U.S. dollar at 4:53 p.m. in Toronto, compared with C$1.0772 yesterday. One Canadian dollar buys 92.88 U.S. cents.

Against the greenback today, Canada’s dollar was outperformed by 10 of the most-traded currencies.
“The U.S. dollar is generally down, but Canada is not fully participating in that action,” said Eric Lascelles, chief economist and strategist at TD Securities Inc. in Toronto, a unit of Canada’s second-biggest bank.

Reasons may include Finance Minister Jim Flaherty’s statement yesterday that Canada’s budget deficits will be double earlier forecasts, as well as the Bank of Canada’s “lack of urgency” in removing fiscal stimulus, Lascelles said.

‘Limited’ Tools 

The central bank kept interest rates at a record low 0.25 percent yesterday and extended a pledge to hold the rate through June 2010, depending on inflation.

Policy makers also reiterated concern that “persistent” currency strength is a risk to economic recovery. Flaherty said today in an interview on BNN Television that the government has “limited” tools to deal with the loonie’s appreciation, the Financial Post newspaper reported.
Crude oil for October delivery fell 3.7 percent today to $69.29 a barrel in New York after swinging between losses and gains, paring its advance over five days to 1.9 percent. Crude is Canada’s largest export and the biggest component on the Bank of Canada’s commodity price index, accounting for 21 percent.

The Standard & Poor’s 500 Index touched 1,048.18 today, the highest since October 2008, before dropping 0.1 percent, its first decline in six days. It increased 2.6 percent on the week.
Canadian government bonds rose. The yield on the benchmark 10-year note decreased as much as four basis points, or 0.04 percentage point, to 3.30 percent, the lowest intraday level since July 13, before trading at 3.32 percent. The price of the 3.75 percent security maturing in June 2019 increased 10 cents to C$103.55.

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