The Canadian dollar sank to the lowest since March versus its U.S. counterpart as weaker-than- forecast data signaled the American economy is slowing, and crude oil, Canada’s biggest export, dropped the most in a month. Canada’s currency, sometimes known as the loonie, gained for a second week versus the euro as European leaders bickered over a rescue for Greece before reaching a compromise yesterday. The loonie fell against the currencies of fellow commodity exporters Australia and South Africa before a report next week that may show that growth in Canadian leading indicators slowed. “The Canadian’s economy’s largest trading partner is the U.S., and the U.S. economy has hit a bit of a temporary soft patch,” said Greg Salvaggio, senior vice president of capital markets in Washington at the currency-trading firm Tempus Consulting Inc. “There has been so much flow related to oil lately that we’re seeing the major sell-off in commodities really steer Canada.” The loonie, nicknamed for the image of the bird on the C$1 coin, traded at 97.94 cents per U.S. dollar, compared with 97.99 on June 10. It reached 98.99 cents on June 16, the weakest level since March 17. One Canadian dollar purchases $1.0210. Canada ships 75 percent of its exports to the U.S. The Canadian currency gained 0.4 percent for the week against nine other developed-nation currencies tracked by the Bloomberg Correlation-Weighted Currency Indexes. It rose 0.3 percent versus the euro to C$1.4015 and touched the strongest level in three weeks, C$1.3825, on June 16. It fell 0.8 percent to C$1.0405 per Australian dollar and weakened 0.6 percent to 14.49 cents per South African rand. Bonds Gain Government bonds rose, pushing the yield on Canada’s benchmark 10-year note down six basis points, or 0.06 percentage point, to 2.94 percent. It touched 2.89 percent on June 16, the lowest level since November. The price of the 3.25 percent security due in June 2021 gained 52 cents to C$102.62. Crude oil for July delivery tumbled 6.3 percent to $93.01 a barrel in New York and touched $91.84, the lowest level since Feb. 22. It closed at $99.29 on June 10. The Standard & Poor’s GSCI Spot Index of raw materials dropped 4.7 percent, its first weekly loss in more than a month. Canada derives about half its export revenue from raw materials including oil. The loonie tumbled on June 16 as the Federal Reserve Bank of Philadelphia’s general economic index unexpectedly fell in June to minus 7.7, the lowest level since July 2009, from 3.9 in May. Readings less than zero signal contraction. The data followed the New York Fed’s Empire State Index a day earlier, which showed manufacturing in its region also fell this month. Greek Crisis The Canadian currency also weakened as Greek Prime Minister George Papandreou said he would reshuffle his cabinet and call a confidence vote in parliament after failing to win support for an austerity program. The political turmoil came as European Union talks on forging a new bailout to prevent the first euro- area default stalled. The loonie erased early losses yesterday as Germany retreated from demands that bondholders be forced to share in the costs of a Greek rescue. Chancellor Angela Merkel said she’ll work with the European Central Bank to avoid disrupting markets. She spoke at a press conference in Berlin with French President Nicolas Sarkozy, who had backed the ECB in opposition to the German stance. The currency appreciated earlier in the week versus the greenback as a report showed China’s industrial output increased. It erased the gains amid the U.S. data and speculation the Greek crisis would worsen. Risk Aversion “We had a massive increase in risk aversion half-way through the week, and commodities started to decline off that, and the Canadian dollar followed,” said Charles St-Arnaud, a foreign-exchange strategist at Nomura Holdings Inc. in New York. Implied volatility for one-week U.S.-Canadian dollar options surged 91.8 basis points to 9.15 percent in its first weekly increase in a month. It reached 10.24 percent on June 16, the highest level since May 16. Implied volatility, which traders quote and use to set option prices, signals the expected pace of swings in the underlying currency. Confidence among U.S. consumers fell in June more than forecast as the Thomson Reuters/University of Michigan preliminary index of consumer sentiment decreased to 71.8, from 74.3 in May, data showed yesterday. The median forecast of economists in a Bloomberg News survey was for a reading of 74. “When we have weak U.S. data, by default that’s negative for Canada,” said Camilla Sutton, head of currency strategy at Bank of Nova Scotia in Toronto. “U.S. consumer confidence is a little concerning.” Factory Sales Manufacturing sales in Canada fell in April for the second time in three months. They decreased 1.3 percent to C$46.7 billion on a seasonally adjusted basis, Statistics Canada said. Bank of Canada Governor Mark Carney restated his forecast that economic growth in Canada is slowing to a “modest pace,” weighed down by temporary factors such as supply-chain disruptions in the auto sector and rising energy prices. Carney, in a speech in Vancouver on June 15, also reiterated that the bank plans to “eventually” raise its benchmark interest rate. Investors expect the Bank of Canada to boost the 1 percent rate by 53 basis points in the next 12 months, according to a Credit Suisse Group AG index based on swaps. The index of leading economic indicators probably advanced 0.5 percent in May, compared with a gain of 0.8 percent in April, according to the median forecast in a Bloomberg survey of economists. Statistics Canada is due to report the data June 21. To contact the reporter on this story: Allison Bennett in New York at abennett23@bloomberg.net To contact the editor responsible for this story: Dave Liedtka at dliedtka@bloomberg.net

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