Canada’s dollar had the biggest weekly decline in a month against its U.S. counterpart, almost reaching parity, as the nation unexpectedly lost jobs and risk appetite dropped on concern Europe’s debt crisis is worsening. The currency fell for a second week as the Bank of Canada kept interest rates unchanged. The U.S. dollar rose against all of its 16 most-traded peers as investors sought haven amid concern Greece might default, and Canadian government bonds climbed. Reports next week may show industrial production and retail sales slowed in the U.S., Canada’s biggest trade partner. “The sole driver of the Canadian dollar at the moment seems to be risk appetite, and when risk appetite is weak, the Canadian dollar tends to underperform,” said Shaun Osborne, chief foreign-exchange strategist at Toronto-Dominion Bank’s TD Securities unit in Toronto. “All of this concern around the euro zone and the speculation regarding Greece doesn’t help risk assets.” The Canadian currency, nicknamed the loonie for the image of the aquatic bird on the C$1 coin, weakened 1.1 percent to 99.67 cents per U.S. dollar in Toronto yesterday, from 98.53 cents on Sept. 2. It was the biggest drop since the five days ended Aug. 5. One Canadian dollar buys $1.0033. The loonie last traded on a one-for-one basis with the greenback on Aug. 9. Canada’s dollar fell 2.3 percent in August against the U.S. currency its first monthly decline since May. The loonie weakened 4.3 percent over the past six months, according to Bloomberg Correlation-Weighted Currency Indexes, a gauge of 10 developed-nation currencies. The greenback declined 1.2 percent. Biggest Threat The U.S. dollar gained to a six-month high versus the euro on concern that European policy makers are failing to fix the region’s debt crisis, the biggest threat to global growth since the collapse of Lehman Brothers Holdings Inc. Stocks fell, with the Standard & Poor’s 500 Index declining 1.7 percent and the MSCI World Index dropping 3.5 percent. “People have been piling into U.S. dollar assets, and pretty much everything else has been sideswiped, including the loonie,” said Dean Popplewell, head analyst in Toronto at the online currency-trading firm Oanda Corp. “Everyone is grabbing safe-haven assets. It’s a sour note to end the week on.” Yields on Canadian government debt dropped to record lows as the securities climbed. Thirty-year bond yields fell 15 basis points on the week, or 0.15 percentage point, and reached 2.80 percent, the lowest level in Bloomberg records dating to 1990. Ten-year note yields dropped 19 basis points and touched 2.095 percent, the lowest since at least 1989. Two-year yields slid to a record low 0.768 percent. Canadian government bonds returned 7.8 percent this year through yesterday, according to a Bank of America Merrill Lynch index. Payrolls Decline Payrolls in Canada fell by a net 5,500 jobs in August after an addition of 7,100 jobs in the previous month, Statistics Canada reported yesterday. The median forecast in a Bloomberg News survey was for a gain of 21,500. Full-time employment rose by 25,700, and part-time jobs fell 31,200, the data showed. The unemployment rate rose to 7.3 percent, from 7.2 percent in July. “It’s not as consistent with a third-quarter rebound as we would like to have seen,” David Watt, senior currency strategist at Royal Bank of Canada’s RBC Capital Markets, said by phone from Toronto. “If the U.S. dollar keeps going like it is, I don’t see why we shouldn’t get down to parity.” The Bank of Canada on Sept. 7 kept its target rate for overnight lending between commercial banks at 1 percent, where it’s been for a year. Policy makers said there’s less need for a rate increase as Europe’s sovereign-debt crisis and a slow U.S. economic rebound hobble the global recovery. Growth to Resume The central bank reiterated that it expects economic growth to resume in the second half of this year, led by business investment and consumer spending. Canada’s gross domestic product fell at a 0.4 percent annualized rate in the second quarter, the nation’s statistics agency reported Aug. 31. Canada was the only G-7 country besides Japan to contract from April through June. Employers in the U.S. added zero jobs last month, the Labor Department said two days later in Washington. It was the weakest reading of the data since September 2010. U.S. retail sales growth slowed in August, increasing 0.2 percent after a 0.5 percent gain the previous month, economists in a Bloomberg survey forecast before a report due Sept. 14. The nation’s industrial production rose 0.1 percent last month, after gaining 0.9 percent in July, according to another survey before data being released Sept. 15. ‘Right Away’ President Barack Obama outlined to Congress on Sept. 8 a $447 billion plan to boost hiring. He urged lawmakers to act “right away” on the program. Canada’s dollar extended losses earlier that day as stocks dropped when Federal Reserve Chairman Ben S. Bernanke failed to offer any specific new plans to bolster growth in the U.S. He said in a speech in Minneapolis that policy makers will discuss at their meeting Sept. 20-21 the tools they could use to boost the recovery and stand ready to employ them if necessary. “When you combine the tone of these speeches with the news coming out of Europe, it contributes to an overwhelming bid for the U.S. dollar,” Jack Spitz, managing director of foreign exchange at National Bank of Canada, said by phone from Toronto. “All of the moving parts are directionally biased in favor of U.S. dollar bids for safe-haven flows.” 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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