By Chris Fournier
Oct. 13 (Bloomberg) -- Canada’s dollar traded near the highest level in more than 14 months, approaching parity with its U.S. counterpart for the first time since July 2008 as investors sought higher-yielding assets.
The Canadian dollar gained 2.5 percent against the greenback in the past five days for the second-best performance among the 16 most-traded currencies tracked by Bloomberg, after the Mexican peso. Crude oil, Canada’s biggest export, touched a seven-week high and gold hit a record. The Canadian currency last traded at C$1 per U.S. dollar on July 22, 2008.
“We could easily reach parity by the end of the week,” said John Curran, a Toronto-based senior vice president at CanadianForex Ltd., an online foreign-exchange dealer.
The Canadian currency appreciated 0.2 percent to C$1.0327 per U.S. dollar at 4:46 p.m. in Toronto, compared with C$1.0348 yesterday. It touched C$1.0267, the strongest level since Aug. 4, 2008. One Canadian dollar buys 96.83 U.S. cents.
Canada’s dollar has a 61 percent probability of reaching parity with the greenback by year-end, according to implied volatility from options trading monitored by Bloomberg. The likelihood by the end of March rises to 73 percent.
The currency, nicknamed the loonie for the aquatic bird on the C$1 coin, pared gains as stocks fell after New York-based analyst Meredith Whitney downgraded Goldman Sachs Group Inc. and said she was “far less bullish” on banking shares.
The U.S. dollar trimmed a drop versus the euro and yen after a large order to buy the greenback, traders said. Earlier the U.S. currency fell as much as 0.7 percent against the euro to touch $1.4876, the weakest since August 2008.
“Everyone is a little too bearish U.S. dollars,” said Steve Butler, director of foreign-exchange trading in Toronto at Scotia Capital Inc., a unit of Canada’s third-largest bank. “However, this move is not over yet,” he said, meaning he expects the Canadian dollar to appreciate further.
The loonie strengthened 4.1 percent over the past month and 18 percent this year.
A currency that rises too quickly has “difficult effects on our economy,” Canadian Prime Minister Stephen Harper told reporters today in Vancouver. Harper said he agrees with the Bank of Canada’s assessment, first aired in June, that a “too rapid” appreciation of the loonie is a risk.
While some of the gains in the Canadian dollar reflect a recovering economy, Harper said, “obviously, the value of the Canadian dollar is a risk to recovery.”
Crude for November delivery rose 1.6 percent to $74.43 a barrel on the New York Mercantile Exchange and reached $74.47, the highest since Aug. 25. Prices are up 67 percent this year. Gold futures for December delivery set a record of $1,069.70 an ounce in New York.
The Standard & Poor’s 500 Index was down 0.3 percent at closing after falling earlier as much as 0.9 percent.
Consumer prices in Canada probably fell 0.9 percent in September from a year earlier, according to the median estimate of 22 economists surveyed by Bloomberg News. Statistics Canada is scheduled to issue the report at 7 a.m. on Oct. 16. The statistics agency will also release data on motor-vehicle sales and manufacturing sales this week.
Canada will auction on Oct. 15 C$1.5 billion ($1.45 billion) of 4 percent securities due in June 2041.
Government of Canada bonds rose today, pushing the two-year note’s yield down five basis points, or 0.05 percentage point, to 1.65 percent. The price of the 1.25 percent security maturing in December 2011 gained 10 cents to C$99.16.
Canada’s government bonds lost investors 1.5 percent this year, according to a Merrill Lynch index.
Rio Tinto Group will pay $388 million to double its stake in Ivanhoe Mines Ltd. to 19.7 percent as part of a 2006 agreement to give Rio a share of a Mongolian copper and gold mine near China’s border, Vancouver-based Ivanhoe said today in a statement.
To contact the reporter on this story: Chris Fournier in Montreal at cfournier3@bloomberg.net
Last Updated: October 13, 2009 16:50 EDT
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