Canada’s dollar traded at almost the lowest level this month versus the greenback as China raised reserve ratio requirements for banks, discouraging demand for assets related to economic growth. The loonie, as the Canadian currency is known for the image of the aquatic bird on the C$1 coin, posted its second straight weekly loss versus the greenback, with a 0.4 percent drop over the past five days. Crude oil, Canada’s biggest export, fell. “We’ve got a bit of a risk-off move overall,” David Watt, senior currency strategist at Royal Bank of Canada’s RBC Capital unit, said by phone from Toronto. “What we’re also seeing playing out now is increasing concern over the health of the global economic recovery.” The Canadian currency was at C$1.0168 per U.S. dollar at 5 p.m. in Toronto, compared with C$1.0190 yesterday. It touched C$1.0262 on Nov. 17, the weakest level since Oct. 28. Crude oil for December delivery declined as much as 1.5 percent to $80.59 a barrel. The MSCI World Index of equities in developed nations was little changed after earlier dropping 0.6 percent. Canada’s currency tends to rise and fall with stocks and commodity prices. Canadian government bonds fell, pushing the 10-year yield up two basis points, or 0.02 percentage point, to 3.14 percent. The price of the 3.5 percent security maturing in June 2020 slid 14 cents to C$102.96 The yield touched 3.16 percent yesterday, the highest level since Aug. 5. Bond Performance The nation’s sovereign debt has lost 1.6 percent in November in what would be the worst performance since December 2009, according to a Bank of America Merrill Lynch index. 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. “As always, the short-term movement in markets could be an overreaction,” Watt said via e-mail. “China’s moves are meant reorient the pace of growth, not to toss an anchor out the back.” Edward Devlin, a portfolio manager at Pacific Investment Management Co., said the fund is “long-term bullish” on the Canadian dollar, though there could be volatility in the short- term because of policy driven “distortions.” Devlin, in an article published on Pimco’s website, said the country should benefit as investors turn to “hard” commodities. Canada garners about half its export revenue from the sale of raw materials such as gold, copper and lumber. 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

Source