BLBG: Canadian Dollar Climbs From Two-Week Low As Stocks, Oil Advance
Canada’s dollar strengthened from the lowest in more than two weeks versus its U.S. counterpart as stocks and oil climbed.
The currency is down this month against most of its major peers as concern European leaders meeting this week will fail to resolve the region’s debt crisis, dimming the outlook for countries that export commodities. Trading patterns suggest the Canadian currency is bound in about a half-cent range, according to Blake Jespersen at Bank of Montreal. (BMO)
“There’s a very slightly improved risk tone today,” Jespersen, managing director of foreign exchange institutional sales at Bank of Montreal, said by phone from Toronto. “The Canadian dollar does seem to find a fair amount of support at the 1.03 level. It’s now starting to run into resistance at 1.0250.” Support and resistance refer the lower and upper boundaries of a trading range, where automatic orders may be clustered.
Canada’s currency, nicknamed the loonie, strengthened 0.2 percent to C$1.0268 per U.S. dollar at 10:03 a.m. in Toronto. It fell to C$1.0318 yesterday, the lowest since June 12. One Canadian dollar buys 97.39 cents.
Government bonds fell, pushing the yield on Canada’s 10- year security three basis points, or 0.03 percentage point, higher to 1.75 percent, or 12 basis points above equivalent- maturity U.S. Treasuries. The price of Canada’s 2.75 percent bonds due June 2022 dropped 35 cents to C$108.99.
Government bonds have returned 2.7 percent this quarter, compared with 1.7 percent for corporates bonds, Bank of America Merrill Lynch Indexes show.
Oil Correlation
The MSCI All-Country World Index rose 0.3 percent after declining 1.4 percent yesterday. The Standard & Poor’s 500 Index rose 0.4 percent today.
Crude oil, Canada’s largest export rose as much as 0.5 percent to $79.64 a barrel in New York before paring gains. Brent crude advanced 0.9 percent to $92.20 a barrel
The loonie is becoming more governed by fluctuations in crude oil prices. The 30-day correlation coefficient between the Canadian dollar and crude oil futures rose to 0.82 today, the highest level this year, from 0.60 at the end of May, Bloomberg data show. The average over the past decade is 0.36. A coefficient of 1 means the measures move in lockstep. The correlation dropped as low as 0.30 in February.
The loonie’s correlation with the S&P 500 was 0.91 today, also the highest this year.
The Canadian dollar dropped 0.6 percent in the past month, according to Bloomberg Correlation-Weighted Indexes, while the greenback fell 0.7 percent and the euro weakened 1.1 percent. The biggest decliner is the pound, down 1.2 percent. The kiwi is up 4.5 percent to lead gainers.
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
