Canada Currency Falls as Stronger U.S. Dollar Pushes Down Oil

By Chris Fournier

Dec. 11 (Bloomberg) -- The Canadian dollar dropped for the first time in three days as its U.S. counterpart strengthened against most major currencies, driving down crude oil, the nation’s biggest export.

Canada’s currency, nicknamed the loonie for the image of the aquatic bird on the C$1 coin, posted a weekly loss as stronger-than-forecast U.S. economic reports sent the greenback up against 12 of its 16 most-traded counterparts tracked by Bloomberg. Crude oil tumbled to a two-month low and gold, another Canadian export, dropped.

“The Canadian dollar is getting hit with the big reversal in crude and gold,” said Michael Leavitt, a Montreal-based institutional-derivatives broker at MF Global Canada Co. “Stronger retail sales and consumer confidence out of the U.S. are helping to strengthen the U.S. dollar.”

Canada’s currency depreciated 0.9 percent to $1.0608 per U.S. dollar at 4:50 p.m. in Toronto, from C$1.0516 yesterday. It fell 0.3 percent in the week. One Canadian dollar buys 94.22 U.S. cents.

Government bonds fell, with the 10-year note down for a fourth day. The yield on the benchmark security rose two basis points, or 0.02 percentage point, to 3.38 percent and touched 3.42 percent, the highest intraday level since Nov. 18. The price of the 3.75 percent note due in June 2019 decreased 19 cents to C$103.

‘Wee Bit Too Far’

The greenback depreciated against the Canadian dollar yesterday and Dec. 9.

“The U.S. dollar bears have probably gone a wee bit too far,” said Dean Popplewell, a currency analyst in Toronto at Oanda Corp., an online currency-trading firm. From now until year-end, traders will be “taking some off the table,” or covering short positions, he said. A short position is a bet that a currency will fall.

Futures traders trimmed bets the Canadian dollar will gain against the U.S. dollar, figures from the Washington-based Commodity Futures Trading Commission show. Net longs, the difference in bets by hedge funds and other large speculators on a Canadian dollar advance versus a decline, dropped to 29,459 on Dec. 8, compared with net longs of 30,809 a week earlier.

Crude oil for January delivery fell 1.3 percent to $69.65 a barrel on the New York Mercantile Exchange after dropping earlier to $69.46, the lowest level since Oct. 8.

Gold futures for February delivery fell 1 percent to $1,115.30 an ounce, capping a 4.6 percent drop this week, the most since February.

“Our commodities have been falling out of bed,” said Popplewell. The Canadian dollar may weaken as the year ends, he said.

Canada’s benchmark stock gauge, S&P/TSX Composite Index, dropped 0.4 percent. The Standard & Poor’s 500 Index rose 0.4 percent after fluctuating earlier.

U.S. Retail Sales

U.S. retail sales increased 1.3 percent in November after climbing a revised 1.1 percent in the prior month, the Commerce Department reported today in Washington. The median forecast of 79 economists in a Bloomberg survey was for a 0.6 percent gain.

The Reuters/University of Michigan preliminary index of consumer sentiment rose to 73.4 for December, compared with 67.4 in the previous month. The median forecast of 71 economists in a separate Bloomberg survey was for an increase to 68.8.

New-home prices in Canada rose 0.3 percent in October, the nation’s statistics agency said in Ottawa, compared with a median forecast in a Bloomberg survey for an advance 0.4 percent.

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