Canada’s dollar traded at almost the strongest level since November 2007 as investors sought shelter after U.S. lawmakers failed to find consensus on raising the nation’s $14.3 trillion debt ceiling. The Canadian currency capped a second-straight weekly gain on July 22 on speculation the nation’s central bank will raise interest rates at least once this year. The currency was the fourth-best performer this month among its 16 most-traded counterparts before a report this week that’s forecast to show Canada’s economy grew at a faster pace in May than April. “There’s room for the Canadian economy to continue with a relatively strong degree of positive momentum, economically speaking, while we’re dealing with all the sovereign-debt distress in the developed world,” Stephen Gallo, head of market analysis at Schneider Foreign Exchange, said by phone from London. “I’d be very surprised if a portion of the recent strength we’ve seen in the Canadian dollar weren’t related to safe-haven flows.” The Canadian currency gained as much as 0.5 percent to 94.35 cents per U.S. dollar, and closed at 94.72 cents at 5 p.m. in Toronto, compared with 94.80 cents on July 22, the day after it reached 94.23 cents, the strongest since Nov. 9, 2007. One Canadian dollar buys $1.0574. U.S. Republicans prepared to force action on a shorter-term extension of the debt limit than President Barack Obama has requested. Deadline for U.S. Treasury Secretary Timothy F. Geithner has said the U.S. will run out of options to prevent a default on Aug. 2 unless the debt ceiling is increased. The impasse has boosted the chance Standard & Poor’s will cut the U.S. credit rating from AAA within three months to 50 percent, the company reiterated on July 21. “The markets are coming to the realization that a reduction in the U.S.’s credit status is going to have to be priced in over time,” Gallo at Schneider said. “No matter what happens with the debt-ceiling talks, this AAA rating that the U.S. has is probably unjustified.” The euro slid against the yen as Moody’s downgraded Greece by three steps, saying the European rescue plan for the debt- laden nation will amount to a default. The 17-nation currency traded at 112.55 yen, down 0.2 percent. Canada’s gross domestic product expanded 0.1 percent in May from a month earlier, according to the median of 22 forecasts compiled by Bloomberg News. Statistics Canada is due to report the data on July 29 in Ottawa. Canadian currency turnover rose to an average $61.2 billion a day in April, an increase of 5.9 percent from October, according to a semi-annual survey of trading published by the Canadian Foreign Exchange Committee. Government bonds were little changed, with the yield on benchmark 10-year debt up less than one basis point at 2.93 percent as the price of the 3.25 percent security maturing in June 2021 gained half a cent on the dollar to C$102.75. 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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