BLBG: Canada’s Currency Appreciates as Crude Oil, Gold Prices Gain
Canada’s dollar rose for the first time in three days as crude oil advanced on bets a conflict between Israel and Hamas could disrupt supplies and gold climbed as investors sought a haven.
“People are keeping an eye on what’s happening in the Middle East,” said George Davis, Toronto-based chief technical analyst at RBC Capital Markets. The increase in crude oil prices is “underpinning the Canadian dollar,” he said.
The loonie, as the currency is known, appreciated 0.3 percent to C$1.2188 per U.S. dollar at 4:36 p.m. in Toronto, from C$1.2219 on Dec. 26. One Canadian dollar buys 82.05 U.S. cents. The loonie will weaken to C$1.31 by the middle of next year, according to RBC’s forecasts.
Commodities account for about half of Canada’s export revenue. Crude oil is the largest component of the Bank of Canada’s Commodity Price Index, accounting for 21 percent.
Crude oil for February delivery rallied as much as $4.49, or 12 percent, to $42.20 a barrel in electronic trading on the New York Mercantile Exchange on concern Israeli attacks in the Gaza Strip may disrupt supply.
Gold futures for February delivery rose $6.60, or 0.8 percent, to $877.80 an ounce. Earlier, the price reached $892, the highest since Oct. 10.
The U.S. dollar depreciated against 10 of the 16 most actively traded currencies tracked by Bloomberg, including the loonie. The exceptions were the Norwegian krone, the Danish krone, the euro, the British pound, the Brazilian real and Mexico’s peso.
‘Holding Its Own’
“The Canadian dollar is holding its own against the U.S. dollar,” said Jack Spitz, Toronto-based managing director of foreign exchange at National Bank of Canada. “The U.S. dollar is weaker across the board as oil and gold rise” on “geopolitical disruptions,” Spitz said.
Israel massed tanks near the Gaza Strip and started calling up thousands of army reservists for what Defense Minister Ehud Barak termed a war against Hamas as Palestinians fired on the Israeli city of Ashkelon.
The yield on the two-year Canadian government bond dropped as much as 17 basis points, or 0.17 percentage point, to 1.045 percent, the lowest level since at least 1989, when Bloomberg records begin. The price of the 2.75 percent security due in December 2010 was last quoted as rising 18 cents to C$103.11.
