Canada’s currency gained as investors favored higher-yielding assets such as equities and commodity-linked currencies, reducing the appeal of the U.S. dollar as a haven. The loonie, as Canada’s dollar is known, gained even as the fate of the country’s ruling Conservative Party hung in the balance. The opposition Liberals, who hold the balance of power in Parliament, may seek to topple Prime Minister Stephen Harper’s government if they don’t support his fiscal stimulus plan released yesterday. “The return of some semblance of market stability and confidence likely helped limit any fallout from political gamesmanship,” said David Watt, a senior currency strategist in Toronto at RBC Capital Markets. “Even though the Canadian dollar is up today, it has lagged many other currencies such as the British pound and the Australian dollar.” The Canadian currency appreciated 0.9 percent to C$1.2196 per U.S. dollar at 8:15 a.m. in Toronto, from C$1.2306 yesterday. One Canadian dollar buys 81.99 U.S. cents. The MSCI World Index, a gauge of stocks in 23 developed countries, climbed 1 percent. The Canadian dollar tends to mirror movements in the MSCI World, along with crude oil and base metals, according to RBC. The Conservative Party unveiled C$40 billion ($32.6 billion) in proposed economic stimulus measures and forecast C$84.9 billion in deficits over five years after more than a decade of consecutive surpluses. Michael Ignatieff, leader of the Liberals, will decide today whether to support the measures. Canada’s currency will drop to C$1.26 against the U.S. dollar by the end of this quarter before rebounding to C$1.20 by the end of the year, according to the median forecast in a Bloomberg News survey of 41 economists.

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