BS: Canadian Dollar Breaks Three Day Slide as Risk Aversion Falls
The Canadian dollar strengthened for the first time in four days against its U.S. counterpart as a decline in risk aversion renewed demand for currencies of nations that rely on natural resources such as oil.
The loonie, as the currency is nicknamed for the image of aquatic bird on the C$1 coin, declined the most in almost three months yesterday after Bank of Canada Governor Mark Carney suggested the prior day that he may reduce his economic outlook and delay raising policy interest rates.
“The Bank of Canada, despite Carney’s comments, has been very consistent that they feel a modest normalization of interest rates will be warranted in the future,” Michael Woolfolk, senior currency strategist in New York at Bank of New York Mellon Corp., said in a telephone interview. “People are also expecting Canada in coming days to report strong retail sales.”
Canada’s currency rose 0.2 percent to 98.44 cents per U.S. dollar at 8:16 a.m. in Toronto. One Canadian dollar buys $1.0159. The currency declined 0.6 percent yesterday.
Oil, the country’s largest export, traded close to the highest level in a week. Crude gained 0.3 percent to $92.34 a barrel.
Investor risk aversion fell after Spain retained its high- grade ranking from Moody’s Investors Service.
Yields Rise
Government bonds fell, pushing the benchmark 10-year note up 0.03 percentage point, or three basis points, to 1.85 percent. The price of the 2.75 percent notes maturing in June 2022 fell 26 cents to C$107.89.
Carney said in an Oct. 15 speech that his quarterly forecast next week will reflect a prolonged global recovery, suggesting he may reduce his growth forecasts and weaken a policy tightening stance at odds with other Group of Seven central banks that have been adding stimulus this year to boost growth. Swap rates show investors have priced in six basis points of easing by July, swinging from nine basis points of tightening at the end of last week.
The yield on September 2013 bankers’ acceptances, a measure of interest-rate expectations, ended yesterday at 1.26 percent, the lowest since July. The contract ended last week at 1.40 percent. The yield has averaged 1.94 percent since it started trading in September 2010. So-called Bax contracts have settled an average of about 0.17 percentage point, or 17 basis points, above the central bank’s target rate since 1992, data compiled by Bloomberg show.
To contact the reporter on this story: Joseph Ciolli in New York at jciolli@bloomberg.net
To contact the editor responsible for this story: Dave Liedtka at dliedtka@bloomberg.net
