BLBG: Canada’s Dollar Falls to Six-Week Low as U.S. Deficit View Saps Risk Bid
Canada’s dollar dropped to the lowest level in six weeks as U.S. political gridlock and Europe’s sovereign-debt crisis spurred demand for the safety of the U.S. currency.
The loonie, as the Canadian dollar is also known, was headed for a 3.3 percent drop this month against the greenback as a report showed wholesale sales rose in September less than forecast and crude oil fell today. The Canadian currency weakened as a U.S. Democratic Party aide said a congressional committee is likely to say it failed to agree on deficit cuts.
“General nervousness and increased focus on political gridlock in the U.S.” is contributing to the Canadian currency’s decline, said David Watt, a senior currency strategist at Royal Bank of Canada’s RBC Capital Markets unit in Toronto, in an e-mail message. “The potential for a material credit crunch in the European Union, which could weigh on global trade, over and above a slowdown in China,” is also a factor, he said.
The loonie dropped 0.7 percent to C$1.0348 per U.S. dollar at 9:20 a.m. in Toronto. It touched C$1.0369, the weakest since Oct. 10. One Canadian dollar buys 96.62 U.S. cents.
The MSCI World (MXWO) Index of stocks in developed nations dropped 0.9 percent today after falling every day last week. Futures on crude oil, Canada’s biggest export, decreased 0.8 percent to $96.67 a barrel in New York.
Rally in Bonds
Canadian government bonds rose, pushing 10-year yields down three basis points, or 0.03 percentage point, to 2.09 percent. The price of 3.25 percent securities maturing in June 2021 increased 20 cents to C$109.96.
Wholesale sales increased 0.3 percent to C$48.7 billion ($47 billion) in September, the statistics agency said. Economists predicted sales would rise 0.7 percent based on the median of 13 responses in a Bloomberg News survey.
The 12-member U.S. bipartisan supercommittee will probably announce today that it can’t agree on deficit savings, the Democratic aide said. The aide, who wasn’t authorized to discuss internal matters publicly and requested not to be identified, said in an e-mail message that it was highly unlikely that the committee’s talks could be salvaged.
The loonie has depreciated 3.8 percent this year in the biggest drop among 10 developed-nation currencies after the New Zealand dollar, according to Bloomberg Correlation-Weighted Currency Indexes. The yen has increased 5 percent, compared with a gain of 0.5 percent for the U.S. dollar.
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
