Canada’s dollar was within 2 cents of trading weaker than its U.S. counterpart as stocks fell on concern Europe’s sovereign-debt crisis is harming financial institutions, discouraging demand for higher-yielding assets. The loonie, as the currency is sometimes known, was headed for a 3.4 percent monthly drop on speculation the global economic recovery is slowing. Stocks also fell today on concern Federal Reserve Chairman Ben S. Bernanke may disappoint investors betting that he will commit in his speech tomorrow in Jackson Hole, Wyoming, to stepping up stimulus. “I am still concerned about downside risk to equities,” said Firas Askari, head of currency trading in Toronto at Bank of Montreal’s BMO Capital Markets unit. “That will lead to a selloff in risk, which will lead to a selloff in the Canadian dollar. The issues in Europe are still there. The issues in the United States are going to take years to solve. Nothing the Fed does is going to take that away in the near future.” The Canadian currency traded at 98.83 cents per U.S. dollar by 5 p.m. in Toronto, compared with 98.71 cents yesterday. One Canadian dollar buys $1.0118. The loonie was last weaker than the greenback on Aug. 9, when it depreciated to C$1.0010. One Canadian dollar buys $1.0122. An agreement by Warren Buffett’s Berkshire Hathaway Inc. to invest $5 billion in Bank of America Corp. briefly spurred demand for riskier assets including Canadian dollars before it petered out, according to traders. Buffett Effect “The Bank of America/Buffett news juiced up risk sentiment quite considerably at first, pushing the Canadian dollar higher,” said Shaun Osborne, chief currency strategist in Toronto at TD Securities Inc., a unit of Canada’s second-largest bank. “We saw U.S. dollar-Canada dollar stops hit in the low to mid-98s to accentuate the move.” Stop orders are placed to buy or sell a security once a certain price is reached. One Canadian dollar buys $1.0122. The yield on 10-year government bonds fell six basis points, or 0.06 percentage point, to 2.40 percent. The price of the 3.25 percent securities maturing in June 2021 rose 51 cents to C$107.31. The yield dropped on Aug. 18 to 2.25 percent, the lowest level in Bloomberg data beginning in 1989. The Standard & Poor’s 500 Index fell for the first time in four days, decreasing 1.6 percent, while the S&P/TSX Composite Index decreased 0.5 percent. Futures on crude oil, Canada’s biggest export, dropped 0.2 percent to $84.99 a barrel in New York. Germany’s DAX Index declined 1.7 percent after plunging 4 percent in about 15 minutes before France, Italy and Spain extended their bans on short selling. A short is a bet an asset may decline in value. Short-Selling Bans The three European countries, along with Belgium, imposed bans on short-selling of some financial stocks earlier this month in an effort to stabilize markets after European banks including Societe Generale (GLE) SA hit their lowest levels since the credit crisis of 2008. Bernanke speaks tomorrow in Jackson Hole, where he indicated in August 2010 that the central bank “will do all that it can” to ensure a continuation of the economic recovery and that more securities purchases may be warranted if growth slows. Two months later, the Fed announced a $600 billion second round of U.S. debt purchases to support the recovery, a program that ended in June. “I suspect Mr. Bernanke tomorrow will just focus on the economy and why at this point they think interest rates are likely to remain on hold,” said Camilla Sutton, chief currency strategist in Toronto at Bank of Nova Scotia’s Scotia Capital unit. The loonie has weakened 3.1 percent in the past month, according to Bloomberg Correlation-Weighted Currency Indexes, a gauge of 10 developed-nation currencies. The greenback has gained 1.8 percent, and the yen has risen 2.4 percent. To contact the reporter on this story: Frederic Tomesco in Montreal at tomesco@bloomberg.net To contact the editor responsible for this story: Dave Liedtka at dliedtka@bloomberg.net

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