BLBG: Canadian Dollar Drops On Speculation Leaders Won’t Solve Crisis
Canada’s dollar dropped versus its U.S. counterpart on concern European Union leaders meeting this week won’t succeed in staunching the region’s debt crisis, dimming the outlook for country’s that export commodities.
The currency extended its 0.3 percent decline from last week, touching the lowest in almost two weeks, as stocks and commodities including crude oil declined. The greenback and yen were the top two performers among major currencies on demand for the most liquid of assets.
“The Canadian dollar wouldn’t be on top of my list of currencies to hold,” Derek Halpenny, European head of global currency-markets research at Bank of Tokyo-Mitsubishi UFJ Ltd. in London, said in a telephone interview. “There’s a high risk of disorderly markets through the summer and into the autumn. We’re bullish U.S. dollar and yen.”
Canada’s currency, nicknamed the loonie for the dollar coin’s aquatic bird’s image, depreciated 0.6 percent to C$1.0311 per U.S. dollar at 9:52 a.m. in Toronto, the weakest since June 12. One Canadian dollar buys 96.98 cents.
Government bonds rose today, pulling the yield on Canada’s five-year security seven basis points lower to 1.24 percent. The price of the 1.5 percent bonds maturing in March 2017 climbed 30 cents to C$101.17. Canadian five-year securities yielded 52 basis points more than their U.S. counterparts, compared with as much as 85 on April 27.
The MSCI All-Country World Index slid 1.4 percent, as did the Standard & Poor’s 500 Index. Brent crude fell 1.2 percent to $90.27 a barrel and oil dropped 2 percent to $78.58 a barrel in New York.
Commodity Linkage
“On the negative side, you have linkages with commodities, and on top of that you have a current account deficit which is sizable enough,” said Bank of Tokyo-Mitsubishi’s Halpenny. “That could undermine the Canadian dollar. The evidence is pointing to slower U.S. growth.”
Canada has a current account deficit of 2.7 percent of gross domestic product, according to data compiled by Bloomberg. That’s the second highest deficit among Group of Seven and euro- area countries, the data show. Crude is the nation’s largest export.
To contact the reporter on this story: Chris Fournier in Halifax at cfournier3@bloomberg.net
To contact the editor responsible for this story: Dave Liedtka at dliedtka@bloomberg.net
