BLBG: Canada’s Currency Depreciates on Concern Global Slump to Deepen
Canada’s dollar weakened against its U.S. counterpart as concern that a worldwide economic recession may deepen crimped commodity-linked currencies.
“There are views of a more prolonged recession and lower global growth, and I don’t think that’s going to be particularly positive for commodity currencies,” said Chris Turner, London- based head of foreign-exchange strategy at ING Groep NV. “Any sort of recovery in commodity currencies will be quite shallow and quite short-lived.”
The Canadian dollar weakened 1.2 percent to C$1.2703 per U.S. dollar, trading close to a seven-week low, at 9:25 a.m. in Toronto, from C$1.2551 yesterday. One Canadian dollar buys 78.72 U.S. cents.
Canada’s currency, dubbed the loonie, extended declines after a government report showed Canadian retail sales fell 2.4 percent in November, the most since January 1998 and more than the 2 percent median forecast of 14 economists surveyed by Bloomberg News.
“Consumers are discouraged,” said Andrew Gretzinger, a senior economist and portfolio manager at MFC Global Investment Management in Toronto, a subsidiary of Manulife Financial Corp. “The Canadian economy continues to weaken, and it’s a foregone conclusion that the U.S. economy is in pretty bad shape. It doesn’t argue well for the Canadian dollar.”
ING’s Turner recommends buying the U.S. dollar against emerging-market and commodity-based currencies, predicting the Canadian dollar will slide to C$1.30 in as little as two weeks.
IMF Forecast
Global economic growth may be weak through 2009 and recovery may not start until next year, Dominique Strauss-Kahn, the head of the International Monetary Fund, said yesterday. He repeated that the IMF later this month will cut its 2.2 percent growth forecast for the global economy this year.
Crude oil declined 1.7 percent to $42.83 a barrel on the New York Mercantile Exchange. Crude generates about a tenth of Canada’s export revenue and is the largest component of the Bank of Canada’s Commodity Price Index, accounting for 21 percent.
The Reuters/Jefferies CRB Index of 19 raw materials dropped 0.5 percent to 218.91. Commodities generate about half of Canada’s export revenue.
The yield on the two-year government bond fell four basis points, or 0.04 percentage point, to 1.03 percent. The price of the 2.75 percent security due in December 2010 rose 6 cents to C$103.13.
