BLBG: Canadian Dollar Rises as Commodities Including Crude Oil Gain
Canada’s dollar rose to a one-week high, following its biggest annual drop on record, as prices of crude oil, natural gas and nickel advanced.
The currency climbed 1 percent this week against its U.S. counterpart as the Reuters/Jefferies CRB Index of 19 raw materials advanced for the first time in three weeks. Commodities account for about half of Canada’s export revenue.
“Commodities have been bid in the small amount of trading we’ve had this week,” said Dustin Reid, director of currency strategy at RBS Global Banking & Markets in Chicago. “You’ve seen the Canadian dollar catching up a bit on higher commodity prices.”
Canada’s dollar gained to C$1.2103 this week from C$1.2219 on Dec. 26. It touched C$1.2067 yesterday, the strongest level since Dec. 25. One Canadian dollar buys 82.63 U.S. cents. The loonie, as the currency is known, may fall to C$1.25 next week if a worse-than-expected U.S. unemployment report leads to a resumed sell-off in commodities, according to Reid.
The loonie fell 18 percent against the U.S. dollar in 2008, the biggest annual decline since at least 1972, the start of Bloomberg data. The global recession cut demand for commodities, which account for about half of Canada’s export revenue.
Crude oil for February delivery climbed 23 percent this week to $46.22 a barrel on the New York Mercantile Exchange. Futures dropped almost 70 percent from a record high of $147.27 a barrel on July 11. Crude is the largest component of the Bank of Canada’s Commodity Price Index, accounting for 21 percent.
Mideast Conflict
Israeli warplanes continued attacks against Hamas in a bombing campaign in the Gaza Strip, raising the prospect of escalating violence in the region, the source of one-third of the world’s oil.
The Reuters/Jefferies CRB Index, which includes raw materials such as crude oil, gold, nickel and natural gas, climbed 8.7 percent this week to 233.92 yesterday. The gauge dropped 36 percent last year.
“We’re probably seeing some optimism that things in 2009 will improve,” said Kate Warne, a market strategist at Edward Jones & Co. in St. Louis. “That will help commodity prices overall.” A short-term drop in demand for oil will weigh on prices, crimping the Canadian dollar, Warner said.
Canada’s dollar will weaken to C$1.28 by the end of the first quarter, according to the median estimate of 39 economists surveyed by Bloomberg News.
U.S. employers eliminated 500,000 jobs in December, near the fastest pace in 34 years, according to the median estimate of 50 economists surveyed by Bloomberg News. Canadian employers cut 22,000 jobs last month, according to economists in a separate survey. Both reports are due Jan. 9.
The yield on the two-year government bond fell four basis points this week, or 0.04 percentage point, to 1.16 percent, from 1.20 percent on Dec. 26. The price of the 2.75 percent security due in December 2010 added 4 cents to C$102.97. The yield touched 1.045 percent on Dec. 29, the lowest since at least 1989, when Bloomberg records begin.
