Canada’s dollar depreciated against its U.S. counterpart as concern European leaders may be unable to resolve the region’s debt crisis diminished demand for commodities and higher-yielding assets. The loonie, as Canada’s currency is commonly called, fell against a majority of its 16 most-traded counterparts as global stocks dropped and raw materials including crude oil and copper fell. Foreign investors bought C$15.4 billion ($16 billion) of Canadian stocks, bonds and money market securities in May, their biggest net purchase in a year, led by federal government bonds, Statistics Canada said today in Ottawa. “The driver continues to be Europe, we’re seeing equities are down, oil is down and the loonie is correlated to those things quite heavily,” said Rahim Madhavji, president of Knightsbridge Foreign Exchange in Toronto. “Things don’t bode too well for the loonie.” The Canadian currency weakened 0.7 percent to 95.97 cents per U.S. dollar at 5 p.m. in New York, compared with 95.32 cents on July 15. It appreciated 1 percent last week. One Canadian dollar buys $1.042. Euro-area government leaders will hold a special summit on July 21, stepping up efforts to stem the contagion from Greece. Leaders are at odds with one another and with the European Central Bank over demands by Germany and Finland that private investors bear some of the burden for a second Greek bailout. Dollar Rally Crude oil for August delivery decreased 1.1 percent to $96.15 a barrel in New York. Oil is Canada’s biggest export. Copper futures fell 0.2 percent. The dollar has rallied the past two years as international purchases of Canadian bonds have set records, including C$96.1 billion in 2010, as investors favored the securities of governments with lower debt burdens. Finance Minister Jim Flaherty says Canada will be able to eliminate its deficit as soon as the fiscal year that starts in April 2014, ahead of other Group of Seven nations. The currency has risen 4 percent versus the greenback this year. “The loonie is this little gem in this currency market,” Madhavji said. “The economy is sound, job growth is sound, inflation is relatively intact, and we’re thinking the Bank of Canada will raise rates sooner rather than later in the U.S and that all bodes well for the loonie.” All 23 economists in a Bloomberg News survey expect the Bank of Canada will leave its policy rate at 1 percent when officials meet in Ottawa tomorrow. The rate has stood at 1 percent since September. Yields on Canada’s 10-year government bonds were little changed at 2.87 percent. The price of a 3.25 percent security due in June 2021 rose four cents to C$103.27. To contact the reporter on this story: Chris Fournier in Halifax, Nova Scotia at cfournier3@bloomberg.net Joe Ragazzo in New York at jragazzo@bloomberg.net To contact the editor responsible for this story: Dave Liedtka at dliedtka@bloomberg.net

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