Canadian Dollar Gains With Stocks, Commodities on Risk Appetite

By Katia Dmitrieva and Allison Bennett - Nov 7, 2012 6:11 AM GMT+0800

The Canadian dollar strengthened against the majority of its 16 most-traded counterparts as rising U.S. stocks and raw materials boosted appetites for higher-risk assets.
Canada’s dollar gained along with the currencies of fellow commodity exporters as the Standard & Poor’s GSCI Index (SPX) of 24 raw materials rose 2.3 percent after the Reserve Bank of Australia kept interest rates unchanged, signaling the global economy is stabilizing. The Canadian dollar, nicknamed the loonie for the image of the aquatic bird on the C$1 coin, may strengthen to a more than two-week high if it breaches the key resistance level of 99 cents per U.S. dollar, as markets await the results of the U.S. presidential election.

“No matter who wins tonight, moving in to the next year, the U.S. is going to be outpacing our counterparts, and that’s going to boost the Canadian and Mexican economies -- the tide raising all boats,” said John Doyle, director of markets in Washington at currency-trading firm Tempus Consulting Inc. “The RBA not cutting rates was the biggest headline today and so you saw a boost in commodities.”
The Canadian dollar appreciated 0.4 percent to 99.21 cents per U.S. dollar at 5:05 p.m. in Toronto. It gained last week from the weakest level in almost three months, C$1.0019. One Canadian dollar buys $1.0080.
The S&P 500 Index added 0.8 percent. Futures of crude oil, the nation’s largest export, rose as much as 4.2 percent to $89.22, the highest level in two weeks.

Technical Analysis

The loonie may strengthen to 98.46 cents per U.S. dollar, last reached on Oct. 19, if it breaches resistance at Friday’s high of 99.21 followed by 99, George Davis, chief technical analyst for fixed income and currency strategy in Toronto at Royal Bank of Canada, said in a note to clients. It will find support at 99.42, followed by 99.62 and 99.84. The bank recommends buying U.S. dollars on dips, with a stop-loss at 99 on an hourly closing basis.

Canadian bonds fell, with the yield on the country’s two- year security rising five basis points, or 0.5 percentage point, to 1.11 percent. The 1 percent note maturing in January 2014 declined 9 cents to C$99.78. The yield on the benchmark 10-year note added four basis points to 1.80 percent.
Athabasca Oil Corp. is proposing the biggest Canadian- dollar denominated junk-bond sale ever as it plans to expand production by 20 times by the end of the decade.

The C$600 million ($602 million) of notes will be issued in a private placement with a maturity in 2017, the company said yesterday in a statement. The bond would rank as the largest speculative-grade issue denominated in Canadian dollars and Athabasca’s first since it become a public company in 2010.

Purchasing Managers

Canada’s Ivey purchasing managers’ index was 58.3 in October on a seasonally adjusted basis, following a September reading of 60.4, according to a statement on the website of Western University’s business school.
Readings of more than 50 indicate purchasing by governments and companies advanced.
Australia’s dollar gained as the nation’s central bank kept its benchmark interest rate unchanged as the world economy stabilizes and domestic inflation picks up, pushing the local currency to a five-week high. The overnight cash-rate target at 3.25 percent was unchanged today, the central bank said in a statement in Sydney. A cut to 3 percent was expected, according to 20 of 27 economists surveyed by Bloomberg News.

‘In Sympathy’

“The Aussie and kiwi are both up, and the loonie lifted in sympathy,” Greg Moore, currency strategist at Toronto-Dominion Bank (TD), said in a phone interview. The kiwi refers to New Zealand’s dollar. “We’re in a wait-and-see mode before the elections, and volatility going forward is the best bet.”
Voters in the U.S., Canada’s largest trading partner, decide today between giving President Barack Obama another four years or replacing him with Republican challenger Mitt Romney. The next president will need to address a so-called fiscal cliff of more than $600 billion in tax increases and spending cuts that take effect in 2013 unless Congress can reach a budget compromise.

To contact the reporter on this story: Katia Dmitrieva in Toronto at edmitrieva1@bloomberg.net
To contact the editor responsible for this story: Dave Liedtka at dliedtka@bloomberg.net