BLBG: Canada’s Dollar Gains on Inflation Data, Higher Risk Appetite
Canada’s currency rose, headed for the biggest two-day gain since December, as inflation unexpectedly accelerated and traders speculated the Federal Reserve’s plan to buy Treasuries will heighten risk appetite.
“The Canadian dollar is benefiting from the stronger-than- expected inflation report,” said Sal Guatieri, a senior economist at BMO Capital Markets in Toronto. “It’s showing less risk of deflation in Canada, and that will weigh against the Bank of Canada aggressively considering quantitative-easing measures.”
Canada’s dollar, known as the loonie, jumped 1.8 percent to C$1.2250 per U.S. dollar at 8:56 a.m. in Toronto, from C$1.2467 yesterday, when it gained 1.9 percent. The currency has strengthened 3.9 percent in two sessions, the biggest two-day gain in three months. One Canadian dollar buys 81.63 U.S. cents.
The Fed yesterday unveiled plans to buy $300 billion in Treasuries concentrated in the two- to 10-year range and purchase an additional $750 billion of agency mortgage-backed securities, a policy known as quantitative easing. That’s sparking concern it may devalue the greenback. The U.S. currency plunged the most yesterday against the euro in nine years.
“The U.S. dollar bears are out in full force,” said Jack Spitz, managing director of foreign exchange at National Bank of Canada in Toronto. “Investors will be looking for alternatives to the bond market. Parking money in equities attracts more risk, and more risk attracts bids to the Canadian dollar. As risk improves, the Canadian dollar is likely to strengthen.”
Stocks Gain
The MSCI World Index, a gauge of stocks in 23 developed nations, jumped 2.5 percent, the eighth straight advance. Futures on the Standard & Poor’s 500 Index advanced 0.9 percent. The Canadian dollar tends to trade in tandem with equities and commodities such as crude oil.
The year-over-year inflation rate quickened to 1.4 percent last month from 1.1 percent in January, Statistics Canada said today in Ottawa. The consumer price index rose 0.7 percent last month from January, the first increase in five months, the agency said. Economists surveyed by Bloomberg predicted the year-on-year pace would slow to 1 percent, and the monthly rate would be 0.3 percent.
