Canada Dollar Gains for First Time in Three Days as Oil Near 29-Month High

By Alexandra Harris - Mar 24, 2011 10:09 PM GMT+0800

Canada’s dollar strengthened against its U.S. counterpart for the first time in three days as crude oil, the nation’s biggest export, traded at almost the highest level in 29 months.

The Canadian currency rose versus most major peers as speculation Portugal will get an international bailout bolstered confidence in the economic outlook, spurring demand for higher- yielding assets. Elections became more likely in Canada after Michael Ignatieff, an opposition leader, said yesterday his Liberal party will introduce a non-confidence motion in the government tomorrow.

“The market has the feel that risk is on,” said C.J. Gavsie, managing director for foreign exchange trading at Bank of Montreal’s BMO Capital Markets unit in Toronto. “Higher oil pricesare going to lead the Canadian dollar today.”

Canada’s currency, also known as the loonie for the image of the aquatic bird on the C$1 coin, gained 0.5 percent to 97.66 cents per U.S. dollar at 10:07 a.m. in Toronto, from 98.16 cents yesterday. One Canadian dollar buys $1.0240.

Crude oil for May delivery advanced as much as 0.9 percent to $106.69 per barrel in New York as U.S. and allied warplanes carried out further strikes against Muammar Qaddafi’s ground forces in Libya. Oil touched $106.95 a barrel, the highest level since September 2008, on March 7.

Stocks rose, with the Standard & Poor’s Index gaining 0.3 percent and the MSCI World (MXWO) Index of equities up 0.4 percent.

Loonie Versus Euro

The loonie appreciated 0.2 percent to C$1.3805 per euro as Portugal moved closer to needing external aid after Prime Minister Jose Socrates’s offer to resign left his government in limbo as a European Union summit opens on the region’s debt crisis. A bailout of Portugal may total as much as 70 billion euros ($99 billion), according to two European officials with direct knowledge of the matter.

Leaders of Canada’s three opposition parties said C$7.6 billion ($7.7 billion) in new measures announced March 22 by Finance Minister Jim Flaherty in his budget presentation weren’t enough to warrant their support. Opposition lawmakers hold a majority of seats in the House of Commons.

Gilles Duceppe, leader of the Bloc Quebecois, and Jack Layton of the New Democratic Party told reporters in Ottawa they will support the Liberal non-confidence motion.

Harper, speaking yesterday to reporters in Ottawa, said Canada’s economy is not a political game and the opposition’s rejection of the budget will hurt the nation.

Political ‘Noise’

“The market will treat any political development as noise,” said David Watt, senior currency strategist at Royal Bank of Canada’s RBC Capital unit in Toronto. “It’s hard to see the political situation dislodge the Canadian dollar.”

Shorter-term Canadian government bonds fell, pushing the yield on the two-year note up two basis points, or 0.02 percentage point, to 1.70 percent. The price of the 1.75 percent security maturing in March 2013 decreased 4 cents to C$100.10.

The number of Canadians receiving jobless benefits fell for the sixth time in seven months in January, Statistics Canada said. The number of regular beneficiaries declined 2 percent to 640,150. It dropped 9.2 percent from the same time a year ago.

To contact the reporter for this story: Alexandra Harris in New York ataharris48@bloomberg.net

To contact the editor responsible for this story: Dave Liedtka at dliedtka@bloomberg.net