BLBG: Canada’s Dollar Advances as Yen’s Role as Haven Currency Eroded
Canada’s dollar advanced for a second day against the yen as Japan’s deteriorating economy eroded the currency’s haven demand.
“The strength in the Canadian dollar against the yen is more a reflection of weakness in the yen,” said Samarjit Shankar, global markets strategy director in Boston at Bank of New York Mellon. “People are trying to get away from the yen as a haven and putting fresh money into the Canadian dollar.”
The Canadian dollar rose 2.4 percent to 77.48 yen at 11:52 a.m. in Toronto, from 75.65 yesterday. The loonie, as the currency is known, strengthened for a fifth day against the U.S. dollar, advancing 0.3 percent to C$1.2467, the longest stretch of gains since May. One Canadian dollar buys 80.21 U.S. cents.
The yen weakened beyond 96 against the U.S. dollar for the first time since November as Japan’s Prime Minister Taro Aso’s approval rating slumped and economists forecast a report will show the trade deficit increased to the widest in 23 years.
“The current Japanese economic situation argues against the yen being used as a safe-haven flow,” said Firas Askari, head currency trader in Toronto at BMO Nesbitt Burns, a unit of Bank of Montreal.
The yen dropped today against all of the 16 major currencies tracked by Bloomberg including the Canadian dollar. It fell the most against the Mexican peso among the major currencies, dropping 3 percent.
Canada’s dollar dropped 18 percent against the U.S. currency last year, the most on record, as a global recession devastated demand for commodities including crude oil, copper and aluminum which account for about half the country’s export revenue. The loonie is down 2.1 percent this year.
The currency will weaken to C$1.26 against the U.S. dollar by the end of the first quarter before rebounding to C$1.22 by year-end, according to the median forecast in a Bloomberg News survey of 43 economists.
The yield on the two-year government bond fell 1 basis point, or 0.01 percentage point, to 1.16 percent. The price of the 2.75 percent security due in December 2010 increased 2 cents to C$102.77.
