Canada’s dollar dropped the most in more than a month against its U.S. counterpart on concern Greece may not receive an installment of aid, crimping demand for higher-yielding assets. “Greece is scaring people, and every asset that has risk associated to it is taking a hit,” said Jerome Bernier, managing director of foreign exchange at National Bank Financial Inc. in Montreal. “Safe-haven flows are going into the U.S. dollar.” The Canadian dollar depreciated 1.3 percent to 99.07 cents per U.S. dollar at 5 p.m. in Toronto, compared with 97.81 cents on Sept. 16. Earlier it fell as much as 1.5 percent, the biggest decline since a 1.8 percent drop on Aug. 10. One Canadian dollar buys $1.0094. The U.S. currency also rose against all except one of its 16 most-traded peers, the yen. It gained ground against the euro, the Australian dollar and the South African rand. Yields on Canada’s 10-year government bonds fell 10 basis points, or 0.1 percentage point, to 2.18 percent. The price of the 3.25 percent security maturing in June 2021 rose 94 cents to C$109.28. The Standard & Poor’s 500 Index fell 1 percent and Canada’s benchmark S&P/TSX Composite Index declined 0.8 percent. Raw Materials Futures on crude oil, Canada’s biggest export, declined 2.3 percent to $85.92 a barrel in New York trading by 5 p.m. local time. Copper for December delivery fell 3.8 percent to settle at $3.7825 a pound on the Comex in New York, the biggest drop for a most-active contract since Nov. 16. The metal has declined about 15 percent this year. The loonie gained 1.2 percent versus the rand and 0.1 percent against the Aussie. Like Canada, Australia and South Africa are commodities exporters. “While the Canadian dollar may be underperforming the U.S., it still looks less susceptible to weakness than the other commodity currencies,” Jeremy Stretch, executive director of foreign-exchange strategy at Canadian Imperial Bank of Commerce, said by phone from London. “In a risk-off, slow-growth scenario, the Canadian dollar is probably going to do better.” The loonie has gained against the currencies of other commodities exporters this month even as it lost ground against its U.S. namesake, in part because investors such as central banks have been buying Canadian dollar assets to diversify their foreign-exchange reserves, said Camilla Sutton, chief currency strategist at Scotia Capital in Toronto. Reserve Diversification “Diversification flows are working in our favor and limiting the downside we would normally see,” Sutton said in a telephone interview. “Canada is a small open economy with relatively strong sovereign position. For central banks seeking to diversify their foreign exchange reserves, the Canadian dollar is increasingly an attractive play for a small percentage of reserves.” Canada’s dollar is the “next-best option” available to currency investors while traditional havens such as the Swiss franc and the yen are closed off, David Bloom, global head of currency strategy in London at HSBC Holdings Plc, wrote today in a note to clients. He based his assessment on factors such as inflation control, public finances and current-account performance. “The Canadian dollar does appear to come out on top but only because of the issues facing the other currencies,” Bloom wrote in the note. “The case for it is far from overwhelming. The conclusion has to be that, in the foreign-exchange market, there is no place to hide, and there will probably be further upward pressure on the price of gold.” Gold Price Gold for immediate delivery has gained about 25 percent since the start of the year. The loonie has weakened 1.7 percent this year, according to Bloomberg Correlation-Weighted Currency Indexes, a gauge of 10 developed-nation currencies. The greenback has declined 2.6 percent, while the yen has gained 3.8 percent and the Swiss franc 4 percent. Investors are concerned Greece won’t meet the conditions to receive a sixth tranche of loans from its first bailout due in October and a second rescue package. “Greece continues to spiral, and the market is starting to lose patience,” David Watt, senior currency strategist at RBC Capital Markets in Toronto, said in a telephone interview. “European leaders don’t seem to be able to come up with any kind of a solution. They’re the gang that can’t shoot straight, and that doesn’t help the confidence.” To contact the reporter for 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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