SF: Canada's Dollar Drops From Two-Week High Before Fed Statement
Nov. 3 (Bloomberg) -- Canada's dollar fell for the first time in five days versus its U.S. counterpart as stocks slid and crude oil pared gains before today's Federal Reserve statement, discouraging demand for assets related to economic growth.
"Equities and commodities have both been under pressure, putting a top on the Canadian dollar ahead of the Fed," Michael Leavitt, institutional-derivatives broker in Montreal at MF Global Canada Co., wrote via e- mail.
The Canadian currency depreciated 0.2 percent to $1.0098 per U.S. dollar at 11:48 a.m. in Toronto, from C$1.0082 yesterday, after touching C$1.0064, the strongest level since Oct. 15. One Canadian dollar buys 99.03 U.S. cents.
The loonie rallied earlier today to a two-week high within a cent of parity on speculation the Federal Open Market Committee in Washington will announce debt purchases that debase the greenback.
New asset buying by the Fed to stoke the recovery and boost prices under an extension of quantitative easing would follow acquisitions of $1.7 trillion in Treasuries and mortgage debt that ended in March. A statement from the U.S. central bank is due at 2:15 p.m. Washington time after a two-day meeting.
Canada's currency may get a boost should Industry Minister Tony Clement allow a $40 billion foreign takeover of Potash Corp. of Saskatchewan Inc., according to analysts.
"The Fed and the Potash decision are significant event risks," Jack Spitz, managing director of foreign exchange at National Bank of Canada in Toronto, wrote via e-mail. "I like the U.S. dollar lower versus the Canadian dollar, to and through parity."
Potash Outlook
Saskatchewan is poised to sue the federal government if Canada approves Melbourne-based BHP Billiton Ltd.'s hostile takeover offer for Potash, Premier Brad Wall told reporters yesterday in Regina. Clement is due to say whether the takeover may proceed after stock markets close at 4 p.m. in New York.
"It could be good for some Canadian dollar gains," Sacha Tihanyi, a currency strategist at Bank of Nova Scotia's Scotia Capital unit, wrote via e-mail, referring to the possibility that Clement will allow the purchase of Potash.
The loonie, as the currency is sometimes known for the image of the aquatic bird on the C$1 coin, reached parity with its U.S. counterpart on Oct. 14 for the first time since April.
The benchmark government 10-year bond yield gained less than one basis point, or 0.01 percentage point, to 2.88 percent. The price of the 3.5 percent security maturing in June 2020 fell 5 cents to C$105.18.
The two-year security's yield was little changed at 1.44 percent after reaching 1.45 percent on Oct. 27, the highest level in a month on a closing basis.
Canadian government bonds are headed for an 8.4 percent annual return in what would be the best performance since 2008. U.S. Treasuries were headed for a 10.6 percent return, compared with 7 percent for global government bonds.
Crude oil for December delivery advanced 0.7 percent to $84.48 a barrel after earlier rising 1.7 percent to $85.36, the highest level since May.
