BLBG: Canadian Dollar Gains Against Its U.S. Counterpart Before Bank Stress Test
Canada’s dollar rose versus its American counterpart before European bank stress-test results as investors wagered the nation’s economy would withstand tepid growth in the U.S., its largest trading partner.
The loonie, as the currency is nicknamed, outperformed most of its 16 major peers and is headed for a five-day gain versus the greenback. It pared gains after a report showed Canadian factory sales declined four times faster than economists forecast in May.
“In the environment of concern about financial-sector strength, the Canadian dollar is a fairly attractive currency relative to its peers,” said David Watt, senior currency strategist at Royal Bank of Canada’s RBC Capital unit in Toronto. “The manufacturing sector is not and won’t be the source of strength for the Canadian economy for the next few quarters.”
The Canadian currency appreciated 0.2 percent to 95.88 cents per U.S. dollar at 9:02 a.m. in Toronto, compared with 96.06 cents yesterday. One Canadian dollar buys $1.0497.
The European Banking Authority will release the results of the stress tests for regional banks as part of an effort to reassure investors that lenders have sufficient capital. The assessments are the first by the EBA since it was set up earlier this year. The results will be published from 5 p.m. U.K. time.
Factory Report
Canadian factory sales fell 0.8 percent to C$46 billion ($48 billion) on a seasonally adjusted basis, Statistics Canada said today in Ottawa. Economists predicted a 0.2 percent decrease, based on the median of 19 estimates in a Bloomberg News survey.
Economic growth may have been less than 2 percent in the second quarter in part because of factory disruptions linked to natural disasters in Japan, according to Bank of Canada Governor Mark Carney.
Yields on 10-year Government of Canada bonds fell one basis point to 2.94 percent and the price of the 3.25 percent security due in June 2021 rose 5 cents to C$102.61. A basis point is 0.01 percentage point.
Foreign investors purchased more Canadian bonds than they sold in every month but one since December 2008, according to Statistics Canada data through April. The agency will report international securities transactions for May on July 18.
“The Canadian dollar is a bit of a haven from the U.S. because if you want to invest in North America, you don’t have the fiscal problems in Canada as you do in the states, so you get an inflow of money,” said Paul Robson, a senior foreign- exchange strategist at Royal Bank of Scotland Group Plc, by phone from London. “You do see foreign buyers of bonds shifting their money out of Treasuries and into Canadian bonds, and that’s supportive.”
Standard & Poor’s said yesterday there’s a 50 percent chance the U.S. will lose its top credit rating. U.S. lawmakers are debating a 10-year budget package aimed at cutting the deficit and raising the nation’s $14.3 trillion debt limit by an Aug. 2 deadline.
To contact the reporters on this story: Catarina Saraiva in New York at asaraiva5@bloomberg.net; Chris Fournier in Halifax, Nova Scotia at cfournier3@bloomberg.net
To contact the editor responsible for this story: Dave Liedtka at dliedtka@bloomberg.net
