BLBG: Canadian Dollar Little Changed After Rebounding as Stocks Rise
Canada’s dollar was little changed after rebounding from earlier losses as stocks advanced.
“Stocks stabilized and markets were very quick to react after yesterday,” said Steve Butler, director of foreign- exchange trading in Toronto at Scotia Capital Inc., a unit of Canada’s third-largest bank. “It looks like U.S. dollar shorts are getting caught here now.” Bets against a currency are known as short positions.
The Canadian dollar, known as the loonie, traded at C$1.2359 per U.S. dollar at 12:01 p.m. in Toronto, from C$1.2357 yesterday. It earlier depreciated as much as 1 percent. One Canadian dollar buys 80.91 U.S. cents.
The Standard & Poor’s 500 Index climbed 1.1 percent after falling earlier as much as 1.1 percent. The MSCI World Index, a gauge of stocks in 23 developed nations, advanced 1.1 percent.
U.S. home prices unexpectedly increased 0.7 percent in February from the previous month, when they rose by a revised 1 percent, the Federal Housing Finance Agency said today.
“The stock market did a 180 on the news about house prices in the U.S.,” said Fabian Eliasson, vice president of currency sales at Mizuho Corporate Bank Ltd. in New York. “News like that gives hope for commodity-linked currencies, including the Canadian dollar.”
Since the collapse of Lehman Brothers Holdings Inc. on Sept. 15 sparked a crisis in financial markets, the loonie has tracked the MSCI World with a correlation coefficient of 0.75, meaning the currency’s moves are more closely tied to the performance of global equities than to crude oil, which has a coefficient of 0.45 over that period, and to copper at 0.50.
The International Monetary Fund said the global recession will be deeper and the recovery slower than previously thought as financial markets take longer to stabilize.
The Washington-based IMF said in a forecast released today that the world economy will shrink 1.3 percent this year, compared with its January projection of 0.5 percent growth. The lender predicted expansion of 1.9 percent next year instead of its earlier 3 percent projection.
