BS: Canadian Dollar Rises as Bank of Canada May Reduce Stimulus
Canada’s dollar extended gains against its U.S. peer after Bank of Canada Senior Deputy Governor Tiff Macklem reiterated policy makers may withdraw monetary stimulus as the nation’s economy recovers.
The loonie, as the currency is nicknamed, strengthened from almost a one-month low amid increased demand for riskier assets after the European Central Bank maintained its benchmark interest rate at a record-low 0.75 percent after a policy meeting. Crude oil, the nation’s largest export, increased for the first time in three days. Canadian employment data will be released tomorrow after the measure rose faster than economists forecast in August.
“The loonie is coming back from the dead after a few rough sessions, as we sold off too far too fast,” said Steve Butler, director of foreign-exchange trading in Toronto at Bank of Nova Scotia’s Scotia Capital unit. “The very hawkish comments by the deputy governor have helped as he reiterated that the Bank of Canada still prefers higher rates.”
Canada’s currency appreciated 0.5 percent to 98.27 cents per U.S. dollar at 10:20 a.m. in Toronto. It touched 98.84 cents yesterday, the weakest level since Sept. 6. One Canadian dollar buys $1.0176.
Crude-oil futures gained 1.4 percent to $89.38 a barrel in New York, after reaching a two-month low yesterday.
Stronger Tone
Government bonds fell, pushing the yield on the 10-year government security up three basis points, or 0.03 percentage point, to 1.74 percent. The 2.75 security maturing in June 2022 lost 24 cents to C$108.92.
The Bank of Canada will announce details today for a three- year note auction on Oct. 10.
The central bank’s benchmark interest rate has been 1 percent for more than two years, the longest pause since the 1950s. The central bank has indicated since April it may raise rates, and in July forecast the economy may reach full capacity in the second half of next year.
Other Group of Seven central bankers have added new stimulus this year to combat flagging growth, including extraordinary asset purchases by the Federal Reserve to reduce unemployment stuck above 8 percent.
Economic Expansion
“To the extent that the economic expansion continues and the excess supply in the economy is gradually absorbed, some modest withdrawal of the present considerable monetary policy stimulus may become appropriate,” Macklem said in the text of a speech he’s giving today in Winnipeg, Manitoba.
Canada has gained 339,000 jobs since recouping the 430,000 jobs lost in the last recession, Macklem said.
Canadian employers added 10,000 jobs last month, compared with 34,300 the previous month, according to a Bloomberg News survey of 24 economists. The jobless rate is projected to hold at 7.3 percent.
U.S. employers added 115,000 jobs in September and the nation’s jobless rate advanced to 8.2 percent from 8.1 percent, according to surveys of economists before the Labor Department report tomorrow.
Canada’s dollar has gained 1.9 percent this year against nine developed-nation counterparts tracked by Bloomberg Correlation-Weighted Currency Indexes. The greenback has dropped 2.3 percent.
To contact the reporters on this story: Cordell Eddings in New York at ceddings@bloomberg.net; Joseph Ciolli in New York at jciolli@bloomberg.net
To contact the editor responsible for this story: Dave Liedtka at dliedtka@bloomberg.net
