Canada’s dollar appreciated as commodities such as crude oil advanced on speculation debt woes in Europe may ease, making higher-yielding currencies more attractive. The loonie, as the Canadian currency is also known, pared gains against the greenback and extended its rise versus the euro after Moody’s Investors Service cut Ireland’s sovereign debt rating to junk. The Bank of Canada will sell C$3.5 billion ($3.6 billion) of two-year notes tomorrow. “There’s a ‘safe-haven lite’ association with the Canadian dollar,” Shaun Osborne, chief currency strategist at Toronto- Dominion Bank’s TD Securities unit, said by phone from Toronto. “The Canadian economy is still relatively well-positioned. We still expect rate increases to come somewhere down the road.” The Canadian currency advanced 0.3 percent to 96.58 cents per U.S. dollar at 4:51 p.m. in Toronto, from 96.88 cents yesterday. It rose as much as 0.8 percent to C$1.3487 per euro, the strongest since March 11. One Canadian dollar buys $1.0355. Crude for August delivery climbed 1.6 percent to $96.65 a barrel on the New York Mercantile Exchange. Oil is Canada’s biggest export. The MSCI World Index of stocks in developed economies fell 0.6 percent. Oil Boost “Oil prices moving from $93.5 a barrel to $97 likely helped” the Canadian dollar move higher, David Watt, senior currency strategist at the RBC Capital Markets unit of Royal Bank of Canada, said in an e-mail. Auctions in Greece and Italy as well as some buying of European Union periphery debt “seemed to help cap periphery spreads and thus contagion fears,” he said. “It wasn’t until sentiment improved that the Canadian dollar started to move through the field.” Canadian bonds were little changed, with the benchmark two- year yield rising two basis points to 1.44 percent before tomorrow’s auction of the debt. The price of the 2 percent security maturing in August 2013 decreased 4 cents to C$101.12. The two-year notes being sold tomorrow mature in November 2013. The previous two-year auction fetched an average yield of 1.57 percent and a bid-to-coverage ratio of 2.42 times, versus an average of 2.6 times over the past five sales. European Bonds Italian and Spanish bonds fluctuated amid speculation the European Central Bank will buy securities of the euro region’s most-indebted nations to stabilize markets amid concern that the debt crisis is worsening. Italian bonds 10-year bond yields rose as much as 33 basis points to 6.02 percent, a 13-year high, before erasing the advance and falling 14 basis points to 5.55 percent. The rise pushed the premium investors demand to hold the debt over German bunds to a euro-era record of as much as 348 basis points. Italy has more bonds outstanding than any other member of the 17- nation euro area. Canada’s currency was the best performer today after the yen and Swiss franc among the 16 most-traded. The 17-nation currency weakened against the dollar after Moody’s reduced Ireland’s sovereign debt rating to Ba1 from Baa3 with a negative outlook. “We do seem to be in a situation of greater concern over financial stability and we have long said that such scenarios should see the Canadian dollar outperform as a bastion of relative financial stability,” RBC’s Watt said. The loonie, which earlier dropped as much as 0.9 percent against the greenback, erased that loss after a report showed the U.S. trade deficit increased in May to the widest level in almost three years, reflecting a surge in crude oil imports. The gap grew 15 percent to $50.2 billion, exceeding forecasts of all 73 economists surveyed by Bloomberg News and the biggest since October 2008, Commerce Department figures showed today in Washington. Exports held near April’s record. “The U.S. dollar sold off on the worse-than-expected data,” Osborne said. “The larger deficit may see U.S. growth expectations nudged lower still.” Canada’s trade deficit narrowed to C$814 million in May, from a revised C$857 million a month earlier, Statistics Canada said today. The figure was in line with the C$800 million shortfall forecast in a Bloomberg survey of 23 economists. To contact the reporter on this story: Chris Fournier in Halifax, Nova Scotia at cfournier3@bloomberg.net To contact the editor responsible for this story: Dave Liedtka at dliedtka@bloomberg.net

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