Canada’s dollar declined for the first month since May versus its U.S. counterpart on speculation that a slowdown in America, the nation’s biggest trade partner, will crimp exports. The currency was little changed today versus the greenback and dropped against the majority of its 16 most-traded peers, falling the most against the Swiss franc and the Mexican peso. A report showed the Canadian economy unexpectedly shrank in the second quarter. “A lot of the weakness in the Canadian dollar is linked to what we’re seeing on the U.S. data front,” said Mary Nicola, a currency strategist at BNP Paribas SA, by phone from New York. “If the U.S. is going to slow down, it’s going to have an impact on Canada. The Canada dollar seems to be the laggard.” The Canadian currency traded at 97.77 cents per U.S. dollar at 5 p.m. in Toronto, compared with 97.79 cents yesterday. One Canadian dollar buys $1.0228. The loonie, as the currency is nicknamed, dropped 2.3 percent this month. Canada’s economy shrank at a 0.4 percent annualized pace during the April-June period following a 3.6 percent gain in the first three months of the year, Statistics Canada said. It was the first quarterly contraction since the recession two years ago, as a strong loonie boosted imports and curbed exports. Economists surveyed by Bloomberg forecast no growth in the quarter, based on the median of 23 responses. The economy grew by 0.2 percent in June, compared with a median forecast in a survey for 0.1 percent expansion. Currencies of countries such as Canada, where natural resources account for more than half of export revenue, tend to rally on economic optimism. ‘Some Solace’ “Maybe some solace will be taken on the back of the monthly data,” said Jack Spitz, managing director of foreign exchange at National Bank of Canada, by phone from Toronto. “The Canadian dollar is likely to lag on the crosses,” he said, referring to trades that don’t involve the U.S. dollar. Government bonds fell, pushing yields on Canada’s benchmark 10-year note up nine basis points, or 0.09 percentage point, to 2.49 percent. The price of the 3.25 percent security due in June 2021 fell 80 cents to C$106.55. Canada sold C$400 million ($409 million) of real-return bonds, drawing a median yield of 0.837 percent. The government received bids of C$1.04 billion for the 1.5 percent, inflation- linked securities due in December 2044, according to a statement today on the Bank of Canada’s website. U.S. Employment Companies in the U.S. added 91,000 workers to payrolls in August, according a report from ADP Employer Services. The median forecast of economists surveyed by Bloomberg News called for an advance of 100,000. U.S. nonfarm payroll growth slowed to 70,000 jobs in August, from 117,000 in July, according to the median forecast in a Bloomberg survey before the government reports the data on Sept. 2. The Standard & Poor’s 500 Index ended the day up 0.5 percent after rising as much as 1.5 percent and falling 0.3 percent. Futures on crude oil, Canada’s biggest export, dropped as much as 1.4 percent before trading little changed at $88.85 a barrel in New York. 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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