Canada’s dollar fell the most in almost a week as crude oil declined and European expansion slowed more than forecast, adding to evidence the global recovery is in jeopardy. The loonie, as the currency is sometimes known, has lost 4.4 percent against the greenback since reaching a three-year high on July 26. Canada’s dollar has weakened on speculation tepid global growth will hinder demand for the nation’s exports. Inflation slowed in July, a report later this week is forecast to show. “The risk-off session with global stocks and commodities being lower, along with some weaker-than-expected Canadian data today, has led to the loonie’s weaker tone against the greenback,” said Joe Manimbo, a market analyst in Washington at Travelex Global Business Payments, a currency-exchange network. The Canadian dollar depreciated 0.3 percent to 98.24 cents per U.S. dollar at 5 p.m. in Toronto, from 97.92 cents yesterday. It weakened as much as 0.8 percent, the biggest intraday drop since Aug. 10. The currency rallied on July 26 to 94.07 cents, the strongest since November 2007, before plunging to C$1.0010 on Aug. 9. One Canadian dollar buys $1.0179. The loonie briefly pared losses as German Chancellor Angela Merkel and French President Nicolas Sarkozy said they were working on “ambitious” joint proposals to defend the euro. It slid after they rejected a mechanism for the euro region to jointly issue bonds to contain its sovereign-debt crisis. ‘Short-Lived’ Rally “It was initially a positive for risky assets, but the rally proved to be short-lived,” Manimbo said. The Canadian dollar and the currencies of two other commodities exporters, the Australian dollar and the South African rand, were the worst performers against the greenback after the Swiss franc. Crude oil for September delivery fell 0.8 percent to $87.15 a barrel in New York trading. The Standard & Poor’s 500 Index dropped 1 percent. Canadian manufacturing sales dropped 1.5 percent in June, more than double the 0.7 percent decline in the median forecast in a Bloomberg News survey, according to data released today by Statistics Canada. The consumer price index, a measure of inflation, rose 2.8 percent in July from a year earlier, after a 3.1 percent gain in the previous month, according to forecasts from economists in a separate Bloomberg survey. The statistics agency is due to release the data on Aug. 19. ‘Good Buy’ “Around the 99-cent level, we’ll start to see a lot of the U.S. dollar sellers come out of the woodwork: Canadian corporates looking to do some longer-term hedging,” said Blake Jespersen, director of foreign exchange in Toronto at Bank of Montreal’s BMO Capital Markets unit, in a telephone interview. “You see good interest from reserve managers as well, generally Asian, some South American. The view is that the setback in the market will be short-term, and the Canadian dollar is a good buy on any weakness.” Canada’s currency pared earlier declines after government data showed U.S. industrial production rose in July by the most this year, and Fitch Ratings affirmed America’s AAA credit rating, saying the outlook was stable. That tempered data from the European Union’s statistics office in Luxembourg that showed gross domestic product in the euro area rose 0.2 percent in the second quarter, from a 0.8 percent expansion in the first quarter. The median forecast of economists in a Bloomberg survey was for 0.3 percent expansion. Canadian government bonds rose, pushing the benchmark two- year note yield down two basis points, or 0.02 percentage point, to 0.99 percent. The yield touched 0.783 percent on Aug. 9, the lowest in Bloomberg records dating to 1989. The price of the 2 percent security due in August 2013 rose 4 cents to C$101.96. Canada’s two-year note yield narrowed one basis point to 81 basis points above the equivalent-maturity U.S. security. The so-called spread shrank last week to 55 basis points, the tightest since February 2010. To contact the reporters on this story: Chris Fournier in Montreal 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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