Canada’s dollar depreciated versus its U.S. counterpart as concern that European officials may fail to halt the region’s sovereign-debt crisis before it spreads to banks cut demand for higher-yielding assets. The Canadian currency rose yesterday by the most in two months against its U.S. counterpart after Germany and France vowed to deliver a plan to support the region’s banks. Stocks and crude oil, Canada’s largest export, fell today before a vote by Slovakian lawmakers on retooling Europe’s bailout fund. “It’s really just what’s transpiring in Europe,” said Camilla Sutton, head of currency strategy at Bank of Nova Scotia in Toronto, in a telephone interview. “The Canadian dollar is vulnerable to following the broader trends.” The currency fell 0.5 percent to C$1.0308 per U.S. dollar at 10:10 a.m. in Toronto. It rose 1.3 percent yesterday, the most since Aug. 9. One Canadian dollar buys 97.01 U.S. cents. The loonie, as the currency is sometimes known, remained lower after Canada Mortgage & Housing Corp. reported on its website that housing starts were 205,900 at a seasonally adjusted annual pace in September. Economists forecast a reading of 190,000 according to the median of 19 responses to a Bloomberg News survey. Bonds Drop Canada’s government bonds dropped, pushing the yield on the two-year benchmark note up four basis points, or 0.04 percentage point, to 1 percent. The 1.5 percent securities maturing in November 2013 declined 8 cents to C$101.01. After appreciating to a three-year high of 94.07 cents on July 26, the Canadian currency weakened as investors pared riskier positions in favor of U.S. dollar safety. It lost 6.9 percent in September, the most in almost three years, as volatility surged on speculation European officials will fail to contain the region’s debt crisis. Crude futures fell 1.5 percent to $84.66 a barrel today. The Standard & Poor’s 500 Index declined 0.3 percent. Traders trimmed bets that the Canadian dollar will decline against the U.S. dollar, Oct. 7 data from the Washington-based Commodity Futures Trading Commission show. The difference in the number of wagers by hedge funds and other large speculators on a decline in the Canadian dollar compared with those on a gain -- so-called net shorts -- was 15,682 on Oct. 4, compared with net shorts of 20,550 a week earlier. Futures are agreements to buy or sell assets at a set price and date. The figures reflect holdings in currency-futures contracts at the Chicago Mercantile Exchange. Canada’s currency will strengthen to C$1.02 versus the U.S. dollar by year-end, according to the median forecast of 36 economists and analysts compiled by Bloomberg. The median forecast from a month ago was for the loonie to end 2011 at 98 cents per U.S. dollar. 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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