BLBG: Canada’s Dollar Rises From Lowest Level in Almost Two Weeks on Buoyed Risk
Canada’s dollar rose from the lowest level in almost two weeks versus its U.S. counterpart on increased demand for higher-yielding assets before the Federal Reserve issues its policy statement.
The Canadian currency’s gain tracked advances in North American stocks and commodities including crude oil. While U.S. central bank policy makers are probably preparing for a third round of large-scale asset purchases, they are unlikely to announce such a decision today, according to economists surveyed by Bloomberg News.
“Risk assets are somewhat supported today,” said Camilla Sutton, a Bank of Nova Scotia currency strategist in Toronto, by e-mail. “There’s the risk of a hint of QE3 at today’s FOMC,” she said, referring to the Federal Open Market Committee and the potential for a third round of quantitative easing.
Canada’s currency gained for the first time in four days, appreciating 0.6 percent to C$1.0139 per U.S. dollar at 9:53 a.m. in Toronto. It touched C$1.0224, the weakest level since Oct. 20. One Canadian dollar buys 98.65 U.S. cents.
The Standard & Poor’s 500 Index rose 1.2 percent after yesterday’s 2.8 percent plunge. The S&P/TSX Composite Index advanced 1 percent. Futures on crude oil, Canada’s biggest export, gained 1.4 percent to $92.94 a barrel in New York.
A gauge of volatility for the U.S. dollar versus the Canadian currency dropped today for the first time in three sessions as European leaders prepared to hold talks to tell Greece there is no alternative to the budget cuts imposed in their bailout plan after Prime Minister George Papandreou called a referendum.
Reduced Volatility
One-month implied volatility fell 17 basis points to 12.78 percent. Volatility increased 140 basis points yesterday, the most since Sept. 22. Implied volatility, which traders quote and use to set option prices, signals the expected pace of swings in the underlying currency.
A drop in government bonds pushed the 10-year yield up five basis points, or 0.05 percentage point, to 2.20 percent. The price of the 3.25 percent securities maturing in June 2021 fell 42 cents to C$109.03. The yield slid yesterday to 2.11 percent, the lowest level since Oct. 5.
Canada will auction today C$3 billion ($3 billion) of bonds due in February 2015. The previous offering of three-year securities on Aug. 10 produced an average yield of 0.965 percent and a bid-to-coverage ratio of 2.185. The ratio measures demand by calculating how much was bid versus how much was sold.
Jobs Report
The nation’s economy added 15,000 jobs last month, according to the median projection in a Bloomberg News survey of 26 economists before Statistics Canada’s Nov. 4 report. The unemployment rate is forecast to stay at 7.1 percent.
The Canadian dollar rallied 1 percent during the five days ended Oct. 7, when the government reported that the economy added 60,900 jobs in September, more than four times as much as economists had forecast.
The loonie, as the currency is also known, has gained 0.2 percent in the past month, according to Bloomberg Correlation- Weighted Currency Indexes, a gauge of 10 developed-nation currencies. The greenback has declined 3.4 percent, and the yen has weakened 6.5 percent.
To contact the reporters on this story: Chris Fournier in Halifax, Nova Scotia, at cfournier3@bloomberg.net; Frederic Tomesco in Montreal at tomesco@bloomberg.net
To contact the editor responsible for this story: Dave Liedtka at dliedtka@bloomberg.net
