Canada’s dollar fell from the strongest this week versus its U.S. counterpart as the Organization for Economic Cooperation and Development slashed growth forecasts and European Central Bank President Jean-Claude Trichet said threats to the euro region have worsened. The currency rose yesterday the most this month versus the greenback as crude oil, Canada’s biggest export, topped $90 a barrel and the central bank reiterated a forecast for growth to resume in the second half, damping bets it might cut borrowing costs this year. Yields on 10-year Canadian government notes slid to a record low today. “The risks have increased,” Camilla Sutton, chief currencies strategist at Bank of Nova Scotia’s Scotia Capital unit, said in a telephone interview from Toronto. “We’re in a very mixed holding pattern now; we’re looking to the major central banks and governments. Temporarily the focus is off currencies like the Canadian dollar.” Canada’s currency, nicknamed the loonie for the image of the aquatic bird on the C$1 coin, depreciated 0.6 percent to 98.95 cents per U.S. dollar at 5 p.m. in Toronto. It touched 98.30 cents earlier today after closing at 98.33 cents yesterday, up 0.7 percent. One Canadian dollar buys $1.0106. The loonie extended losses as North American stocks dropped when Federal Reserve Chairman Ben S. Bernanke failed to offer any specific new plans to bolster growth in the U.S., Canada’s biggest trade partner. Bernanke said in a speech in Minneapolis policy makers will discuss at their meeting this month the tools they could use to boost the recovery and stand ready to employ them if necessary. Stocks Fall The Standard & Poor’s 500 Index dropped 1.1 percent after earlier gaining 0.5 percent. President Barack Obama will propose a $300 billion stimulus plan to Congress tonight in Washington as U.S. job growth stalls and the unemployment rate hovers above 9 percent. Government bonds climbed as investors sought safety amid concern the global economic slowdown is worsening. Yields on benchmark 10-year notes dropped as much as six basis points, or 0.06 percentage point, to 2.209 percent, the lowest in Bloomberg records dating to 1989. The price of the 3.25 percent securities maturing in June 2021 increased 49 cents to C$109.03. Thirty-year bond yields were within one basis point of a record low 2.886 percent. Crude oil fluctuated, with October futures rising as much as 1 percent to $90.23 a barrel in New York and falling as much as 1.1 percent. The contract closed at $88.62 a barrel. OECD Forecasts The loonie fell after the OECD said the U.S., Canada’s biggest trade partner, will grow 1.1 percent in the third quarter and 0.4 percent in the fourth, instead of the 2.9 percent and 3 percent predicted in May. Japan will expand 4.1 percent in the third quarter before stalling in the fourth, the OECD said. Central banks around the world should be ready to ease monetary policy if economies weaken further, the Paris-based group said. The ECB cut its 2011 growth forecast to 1.6 percent from 1.9 and to 1.3 percent from 1.7 percent for 2012. Threats to the euro region’s economy have “intensified” and inflation risks have eased as the area’s debt crisis worsens, Trichet said. The economy faces “particularly high uncertainty and intensified downside risks,” he said in Frankfurt after the ECB held its key rate at 1.5 percent. Employment Data Statistics Canada will issue employment data for August tomorrow. The unemployment rate stayed at 7.2 percent, while 21,500 new positions were created, according to the median of 22 forecasts by economists surveyed by Bloomberg. “We get residual flows on the back of everybody globally struggling to figure out where do you keep your money,” Scotia Capital’s Sutton said. That’s keeping the currency above parity, she said. The Canadian currency “is less of a haven story and more of a diversification story,” Sutton said. Canada’s merchandise trade deficit shrank to C$753 million ($765 million) in July from a revised C$1.37 billion a month earlier on a rebound in exports led by shipments of automobiles and parts, Statistics Canada said today in Ottawa. Economists forecast a C$1 billion shortfall, according to the median of 18 estimates in a Bloomberg survey. 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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