Canada’s dollar snapped three days of gains against the greenback as crude oil slid after a report showed U.S. inventories rose to a two-year high and stocks fell, sapping demand for higher-yielding assets. The loonie, as the Canadian dollar is also known for the image of the aquatic bird on the C$1 coin, weakened a day after Finance Minister Jim Flaherty said the government wants to avoid extreme currency fluctuations. Two-year government bonds rose after an auction of the debt. “The primary driver for the decline in the Canadian dollar is the midmorning selloff in oil,” said George Davis, Toronto- based chief technical analyst for fixed-income and currency strategy at Royal Bank of Canada. “That points to a risk-off environment, which tends to be negative for the Canadian dollar.” The loonie depreciated 0.5 percent to 96.19 cents versus the greenback at 5 p.m. in Toronto, from 95.68 cents yesterday. One Canadian dollar buys $1.0396. The currency touched 94.46 cents on April 29, the strongest level since November 2007. Crude oil for June delivery fell 5.1 percent to $98.60 a barrel. The Standard & Poor’s 500 Index slid 1.1 percent. The S&P/TSX Composite Index dropped 1.6 percent. Supplies of crude in America, Canada’s biggest trading partner, jumped by 3.78 million barrels to 370.3 million in the week ended May 6, the U.S. Energy Department said. The median forecast of 16 analysts in a Bloomberg News survey was for inventories to climb by 1.5 million barrels. The increase puts supplies at the highest level since May 8, 2009. Loonie Versus Euro The loonie advanced 1 percent to C$1.3652 against the euro on speculation Greece may restructure its debt while Canada’s economy grows stronger. The Canadian currency touched C$1.3636, the strongest level since April 1. “In the context of trouble in the euro region, we’re seeing flows into Canada,” said Rahim Madhavji, president at Knightsbridge Foreign Exchange Inc. in Toronto. “Canada has what everyone wants. It has a sound and growing economy and fiscal prudence.” Canadian employers added a net 58,300 jobs in April after a decrease of 1,500 in the previous month, Statistics Canada reported last week. The median forecast of 25 economists in a Bloomberg News survey was for an increase of 20,000. The jobless rate unexpectedly dropped to 7.6 percent. The nation reported a fourth straight trade surplus in March, the longest stretch since November 2008 and a sign that exporters are recovering from the global recession. Trade Surplus The surplus widened to C$627 million ($658 million), Statistics Canada said today, larger than the C$400 million median forecast in a Bloomberg survey of 21 economists. The agency also raised the combined total surplus for the prior two months by C$1.33 billion. The Conservative Party will use its election victory last week to ensure the nation erases its budget deficit in three years, Flaherty said yesterday at the Bloomberg Canada Economic Summit in Toronto. While Flaherty said a strengthening currency is a reflection of confidence in the Canadian economy, he added that the government wants to avoid “jerky” movements in the Canadian dollar and said the government wouldn’t intervene in currency markets without an extreme cause. Flaherty also said he doesn’t want to see increasing “weakness” in the U.S. dollar. A gain today in two-year Canadian government bonds pushed the yield down three basis points, or 0.03 percentage point, to 1.69 percent. The price of the 1.75 percent security maturing in March 2013 increased 5 cents to C$100.10. Canada sold C$3.5 billion ($3.7 billion) of two-year debt, drawing an average yield of 1.873 percent. The government received bids of C$8.8 billion for the 2 percent securities maturing in August 2013, according to a statement on the Bank of Canada’s website. To contact the reporter for this story: John Detrixhe in New York at jdetrixhe1@bloomberg.net To contact the editor responsible for this story: Dave Liedtka at dliedtka@bloomberg.net

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