Canada’s dollar weakened after rising yesterday to the highest level in more than a month as optimism that Europe’s debt crisis is contained faded, damping demand for riskier assets. The Canadian currency was headed for its fourth straight weekly advance against the greenback, which has lost value against all of its 16 major counterparts since Oct. 21. The Canadian dollar is the third-worst performing major after the Bank of Canada cut its growth outlook this week. Canada’s dollar capped the biggest two-day gain yesterday since May 2010 after European leaders announced a plan to stave off a Greek default and safeguard banks. “There’s a general pullback in risk sentiment,” said Eric Viloria, senior currency strategist at Gain Capital Group LLC in New York, in a telephone interview. “We’re not seeing too much follow-through on the risk rally. There’s still a lot of implementation risk.” Canada’s currency declined 0.4 percent to 99.46 cents per U.S. dollar at 9:42 a.m. in Toronto. It touched 98.92 cents yesterday, the strongest level since Sept. 20. One Canadian dollar buys $1.0054. The Standard & Poor’s 500 Index fell 0.3 percent and futures on crude oil, the nation’s largest export, declined 1.6 percent to $92.49 a barrel in New York. Canadian government bonds rose, pulling 10-year benchmark yields down five basis points, or 0.05 percentage point, to 2.43 percent. The price of the 3.25 percent security maturing in June 2021 advanced 46 cents to C$106.94. Euro Track The Canadian dollar tracked the euro lower against the U.S. dollar as Italy sold less than its maximum target at a bond auction and Fitch Ratings said part of the plan to contain debt turmoil amounts to a Greek default. European Union leaders agreed this week to boost the region’s rescue fund capacity to 1 trillion euros ($1.4 trillion) and persuaded holders of Greek bonds to accept a 50 percent writedown on the country’s debt. “Certainly, it’s a step in the right direction; still the question is whether it will be enough,” said Gain Capital’s Viloria. “I’m not surprised there’s no follow-through.” Canada’s currency had strengthened to almost its 100-day moving average and its so-called Fibonacci retracement levels just below 99 cents per U.S. dollar, Viloria said. The Canadian dollar should weaken to parity with its U.S. counterpart as traders cover short positions and month-end portfolio-balancing flows push the greenback higher, Brad Schruder, vice president of institutional foreign-exchange sales at Bank of Montreal in Toronto, wrote in a note to clients today. He recommended selling the loonie, as the Canadian currency is sometimes known, on advances to the 99-cent to 98.90-cent range. 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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