Canada’s dollar gained the most this month against its U.S. counterpart after consumer prices rose in May more than economists forecast, prompting traders to ratchet up bets the central bank will resume boosting borrowing costs. The currency strengthened versus the majority of its most- traded peers as increases in stocks and commodities before the Greek parliament’s vote on an austerity plan spurred demand for higher-yielding assets. “Way above expectations,” said C.J. Gavsie, managing director for foreign-exchange trading at Bank of Montreal’s BMO Capital Markets unit in Toronto, referring to the inflation figures. “This is all just adding together with the Greek news. We’re off to the races with a strong Canadian dollar.” The loonie, as the Canadian currency is also known for the image of the aquatic bird on the C$1 coin, appreciated 0.9 percent to 97.27 cents per U.S. dollar at 8:32 a.m. in Toronto, from 98.12 cents yesterday. It strengthened the most on an intraday basis, 0.91 percent, since May 31. One Canadian dollar purchases $1.0281. Consumer prices rose 3.7 percent in May from a year earlier, the fastest since 2003, Statistics Canada data showed in Ottawa today. The gain exceeded all 24 forecasts in a Bloomberg News survey of economists, whose median prediction was for a 3.3 percent increase. Inflation was 3.3 percent in April. The core inflation rate, which excludes eight volatile items such as gasoline, accelerated to 1.8 percent from a year earlier. Economists had forecast it would slow to 1.5 percent. Bank of Canada The Bank of Canada kept its benchmark overnight lending rate at 1 percent on May 31, where it has been since September. Policy makers are expected to raise the rate to 1.5 percent by year-end, according to forecasts compiled by Bloomberg. December 2011 bankers’ acceptances, the most active contract, yielded 1.45 percent, the most in more than a week, after falling to 1.36 percent on June 24, the lowest closing price since they started trading in December 2008. The yield on so-called Baxes averages about 18 basis points above the central bank’s overnight target, Bloomberg data since 1992 show. A government report tomorrow may show Canada’s economy shrank in April, with gross domestic product contracting 0.1 percent from the previous month, according to the median of 22 forecasts compiled by Bloomberg. GDP grew 0.3 percent in March. ‘May Be Tempered’ “Any fear about rates that has crept into the market in the aftermath of the CPI data may be tempered by the GDP data tomorrow,” said Shaun Osborne, chief currency strategist at Toronto-Dominion Bank’s TD Securities unit in Toronto. “It’s expected to be weak and underscore the headwinds facing the economy.” While today’s CPI number gives the central bank “food for thought,” much of the pressure appears to be seasonal and the core inflation rate remains below the bank’s target of 2 percent, Osborne said. “There’s no urgency for the Bank of Canada at this stage,” he said. Futures on the Standard & Poor’s 500 Index expiring in September increased 0.5 percent. Crude oil for August delivery gained 1.3 percent to $94.07 a barrel. Oil is Canada’s biggest export. Greece’s parliament votes today on Prime Minister George Papandreou’s 78 billion-euro ($112 billion) austerity package, needed before the cash-strapped nation can tap a fifth portion of last year’s 110 billion-euro rescue and euro-area finance ministers can approve a second aid package. 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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