By Chris Fournier May 12 (Bloomberg) -- Canada’s dollar rose for a fourth day in the longest stretch of gains in almost six weeks as a gain in stocks made currencies tied to economic growth more attractive. The loonie, as the currency is known for the image of the aquatic bird on the C$1 coin, was the third-best performer against the greenback over the past five days among the U.S. currency’s 16 most-traded counterparts, trailing the Mexican peso and the South African rand. The Canadian dollar pared its advance today as crude oil erased its rally. “The market is focused on Canada as a fiscally sound commodity-producing country with a decent to rising economy and a soon-to-be-hawkish central bank,” said Jack Spitz, managing director of foreign exchange at National Bank of Canada in Toronto. The Canadian currency advanced 0.2 percent to C$1.0198 per U.S. dollar at 4:06 p.m. in Toronto, from C$1.0221 yesterday, when it touched C$1.0149, the strongest level since May 4. The loonie earlier appreciated 0.7 percent. One Canadian dollar buys 98.10 U.S. cents. The Standard & Poor’s 500 Index increased 1.4 percent today, while the S&P/TSX Composite Index gained 1.6 percent. Crude oil for June delivery dropped 1.3 percent to $75.37 a barrel on the New York Mercantile Exchange after earlier rising 0.8 percent. Crude is Canada’s biggest export. The three-year Canadian bond yield rose as much as 6 basis points, or 0.06 percentage point, to 2.5 percent, the highest level since April 29, and later increased 4 basis points to 2.47 percent. The price of the 3.5 percent security due in June 2013 decreased 12 cents to C$103. Canadian Auction Canada sold C$3 billion ($2.94 billion) of three-year bonds maturing in September 2013, drawing an average yield of 2.604 percent. The government received bids of C$6.7 billion for the 2.5 percent securities, according to a statement today on the Bank of Canada’s website. The loonie will likely return to parity after the greenback dropped below support in the range of C$1.0207 to C$1.0225, according to Citigroup Inc. Canada’s currency is headed toward 99.31 cents per U.S. dollar, a level was last reached on April 21, Citigroup strategists Tom Fitzpatrick and Aron Gera in New York and Shyam Devani in London wrote in a research note to clients today. Support refers to the lower boundary of a trading range where buy orders may be clustered. Parity With Greenback The loonie traded on a one-for-one basis with the greenback on April 6 for the first time in almost two years on speculation Canada will be the first Group of Seven country to raise interest rates. The currency weakened to C$1.0734 on May 6 as the European sovereign-debt crisis spurred demand for the perceived safety of the U.S. dollar. Canada’s merchandise trade surplus unexpectedly narrowed in March to C$254 million from a revised C$1.2 billion in the previous month, Statistics Canada reported. The median forecast of 19 economists in a Bloomberg News survey was for an increase to C$1.6 billion from a previously reported C$1.4 billion. Finance Minister Jim Flaherty anticipated in March that the budget deficit will narrow to C$1.80 billion in 2014, from a record C$53.8 billion last year. Traders have increased bets that the Bank of Canada will boost the target lending rate at its June 1 meeting from a record low 0.25 percent. The yield on the June 2010 bankers’ acceptances contract has increased 9 basis points this year to 0.90 percent. The yield surged to 0.94 percent on April 20 after the central bank dropped a pledge to keep its target lending rate unchanged through June. The contracts, which money managers and hedge funds use to manage risk related to interest-rate changes and to place bets, have settled at an average of 17 basis points above the central bank’s overnight target since Bloomberg started tracking the difference in 1992. To contact the reporter on this story: Chris Fournier in Montreal at cfournier3@bloomberg.net

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