By Chris Fournier Nov. 20 (Bloomberg) -- Canada’s dollar fell for a second week against its U.S. counterpart as the biggest five-day decrease in crude oil since August reduced demand for assets related to economic growth. The loonie declined versus most of its major counterparts on concern a stalled recovery in the U.S., the nation’s biggest trading partner, and a move by China to cap growth will encourage the Bank of Canada to keep borrowing costs lower for a longer period of time. Retail sales excluding autos rose in Canada at a slower pace in September, a government report is forecast by economists to show. “The key thing is still the U.S. economic outlook, and it still looks choppy,” David Watt, senior currency strategist at Royal Bank of Canada’s RBC Capital unit, said by phone from Toronto. “It’s not like the U.S. is going to hit escape velocity anytime soon.” The Canadian currency depreciated 0.4 percent to C$1.0168 per U.S. dollar yesterday, from C$1.0123 on Nov. 12. One Canadian dollar buys 98.35 U.S. cents. The loonie, as the currency is known for the image of the aquatic bird on the C$1 coin, touched C$1.0262 on Nov. 17, the weakest level since Oct 28. It slid 0.3 percent to C$1.3903 versus the euro. The Bank of Canada will hold its policy rate at 1 percent through the end of the second quarter, according to the median forecast of 22 economists in a Bloomberg News survey this month. The median forecast in October was for the target to rise to 1.50 percent by then. ‘Notable Shift’ “There’s been a pretty notable shift,” Eric Lascelles, chief economics and rates strategist at Toronto-Dominion Bank’s TD Securities unit, said by phone from Toronto. “That the Bank of Canada is perceived to be sitting on hold is not a helpful thing for the currency.” Canadian retail sales excluding autos increased 0.3 percent in September after a 0.4 percent gain in the previous month, according to the median forecast of 19 economists in a Bloomberg News survey. The report from Statistics Canada is scheduled to be released Nov. 23. A U.S. Labor Department report showed this week that consumer prices excluding food and fuel increased 0.6 percent last month from October 2009 in the smallest year-over-year gain since at least 1958. Builders began work on the fewest homes since a record low reached in April 2009, the Commerce Department said. Canada ships about two thirds of its exports to the U.S. Global Outlook The Canadian dollar weakened versus the greenback on the prospect for a slowing global economy. China ordered banks to set aside larger reserves for the second time in two weeks, draining cash from the financial system to limit inflation and asset-bubble risks in the world’s fastest-growing major economy. Crude oil dropped 3.9 percent to $81.60 a barrel in the biggest weekly drop since Aug. 13, when it dropped 6.6 percent. The MSCI World Index of developed-world stock markets was little changed after falling 2.2 percent in the previous week. Canada’s 10-year bonds fell this week, pushing the yield up 13 basis points, or 0.13 percentage point, to 3.15 percent. The price of the 3.5 percent security maturing in June 2020 dropped C$1.11 to C$102.90. The yield touched 3.16 percent this week, the highest level since Aug. 13. The loonie is still headed for a 3.6 percent advance this year versus the greenback, which has suffered against its major counterparts as the Federal Reserve carries out quantitative easing to spur growth. The Fed announced $600 billion in bond purchases on Nov. 3. --Editors: Dennis Fitzgerald, Dave Liedtka To contact the reporter on this story: Chris Fournier in Montreal at cfournier3@bloomberg.net To contact the editor responsible for this story: Dave Liedtka at dliedtka@bloomberg.net

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