Canada’s dollar rose from the lowest level in more than a year on speculation its third-quarter plunge will be hard to sustain as the government maintains forecasts for a balanced budget by 2014. The currency had its biggest three-month drop since the depths of the global financial crisis in 2008 on concern the global economy is veering toward another liquidity crisis. It touched the weakest level in more than a year today against the greenback before rising against a majority of its most-traded counterparts. “The sell-off created some oversold balances,” David Watt, senior currency strategist at Royal Bank of Canada’s RBC Capital Markets unit in Toronto, said in a telephone interview. “We’re just getting a relief rally.” The Canadian currency appreciated 0.1 percent to C$1.0492 per U.S. dollar at 8:28 a.m. in Toronto, from C$1.0503 on Sept. 30. It touched C$1.0524, the weakest level since Sept. 3, 2010. One Canadian dollar buys 95.34 U.S. cents. Canadian Finance Minister Jim Flaherty has said the government’s fiscal projections for the current year remain consistent with forecasts even amid indications the economy has slowed. The government has benefited from higher tax revenue from personal income taxes. The federal deficit widened in July to C$1.6 billion ($1.53 billion), from C$473 million a year earlier, according to a Sept. 30 statement from the finance department. Balanced Budget Flaherty released a fiscal plan in June that seeks to balance the budget by 2014 through government operating cost cuts of up to C$4 billion annually, and by closing tax loopholes. Canada projects a deficit of C$32.3 billion this year, compared with C$36.2 billion for the fiscal year that ended in March. The euro fell today to an eight-month low against the U.S. dollar as European finance ministers prepared to weigh the threat of a default in Greece, which is making fresh budget cuts to secure an international bailout. “The Canadian dollar is a little cheap at this point,” said Watt. “But if they don’t resolve the EU situation quickly, things could get a lot uglier. It’s a brave person who would really want to jump in and go long the Canadian dollar at this point against the U.S. dollar.” A long is a bet an asset may gain in value. 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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