BLBG: Canadian Dollar Weakens as Report Shows Nation’s Economy Contracted in May
Canada’s dollar extended losses versus its U.S. counterpart after a report showed Canada’s economy unexpectedly contracted in May by the most in two years as production in the mining and oil and gas sector declined.
Canada’s currency fell versus a majority of its major counterparts as a report showed the U.S. economy grew less than forecast in the second quarter, after almost coming to a halt at the start of the year, as consumers retrenched. Crude oil, Canada’s largest export and global equities, traditional drivers of Canada’s dollar, declined.
“The fact that Canada and U.S. GDP weren’t great just took a toll on the Canadian dollar,” said Brian Kim, a currency strategist in Stamford, Connecticut, at Royal Bank of Scotland Group Plc. “Disappointing GDPs in North America in general are not helping the currency.
The Canadian currency weakened 0.7 percent to 95.61 cents per U.S. dollar at 8:48 a.m. in Toronto, compared with 94.93 yesterday. It has gained 1.3 percent this month, from 96.34 cents on June 30 and touched 94.07 cents on July 26, the strongest since Nov. 9, 2007. One Canadian dollar buys $1.0459.
Crude oil futures slipped 1.3 percent to $96.14 a barrel. The MSCI World Index of equities in developed countries declined 0.5 percent.
Economic Data
Canada’s economic output fell 0.3 percent in May to C$1.26 trillion ($1.32 trillion) on a seasonally adjusted basis, after being little changed in April and gaining 0.3 percent in March, Statistics Canada said today in Ottawa. Economists in a Bloomberg survey forecast the economy would grow 0.1 percent, based on the median of 24 responses.
“The silver lining is that for the Canadian GDP, the data is from May, so still contains a lot of temporary supply-chain effects stemming from the Japanese earthquake,” RBS’s Kim said.
U.S. gross domestic product rose at a 1.3 percent annual rate following a 0.4 percent gain in the prior quarter that was less than previously estimated, Commerce Department figures showed today in Washington. The median forecast of economists surveyed by Bloomberg News called for a 1.8 percent increase.
Canada’s currency weakened earlier as an impasse between President Barack Obama and House Speaker John Boehner spurred some investors to predict the U.S. will lose its AAA credit rating. Moody’s Investors Service said it may cut Spain’s credit ranking.
“Things in Canada still look good, but with risk off as we await the Aug. 2 U.S. debt deadline,” said Steve Butler, managing director of foreign-exchange trading in Toronto at Bank of Nova Scotia’s Scotia Capital unit, via e-mail. “The Canadian dollar looks vulnerable today.”
To contact the reporter on this story: Frederic Tomesco in Montreal at tomesco@bloomberg.net; Chris Fournier in Toronto at cfournier3@bloomberg.net
To contact the editor responsible for this story: Dave Liedtka at dliedtka@bloomberg.net
