BLBG: Canada’s Dollar Trades Near Week Low on Risk Aversion, Economy
Canada’s currency traded near a one- week low as a report showed the economy shrank in November more than forecast and the global slump led investors to take refuge in the U.S. dollar.
The currency, known as the loonie, has dropped 0.7 percent this month as the U.S. economy contracted the most in the fourth quarter since 1982, spurring the demand for safety. The U.S. is Canada’s largest export market.
“GDP numbers for Canada were horrible,” said David Watt, a senior currency strategist in Toronto at RBC Capital Markets. “Any sort of rebound in confidence in the Canadian dollar has proved elusive.”
The Canadian dollar traded at C$1.2275 per U.S. dollar at 4:29 p.m. in Toronto, from C$1.2267 yesterday. It touched C$1.2418, the weakest since Jan. 23. One Canadian dollar buys 81.47 U.S. cents.
The loonie will weaken to C$1.26 against the U.S. dollar by the end of March before rebounding by year-end to C$1.20, according to the median forecast of 41 economists surveyed by Bloomberg News.
Canada’s economy, the world’s eighth-largest, contracted 0.7 percent in November, Statistics Canada said today in Ottawa. The drop was the biggest since August 2003, when northeastern North America was hit by a power blackout.
The U.S. economy, which consumes more than three quarters of Canadian exports, shrank at a 3.8 percent annual pace last quarter, the Commerce Department said in Washington.
Greenback Versus Rivals
The greenback strengthened against all of its 16 most actively traded counterparts except the pound and the yen as investors sought relative safety from global economic turmoil in the world’s reserve currency.
“The U.S. dollar looks pretty bullet-proof at the moment,” said Shaun Osborne, Toronto-based chief foreign- exchange strategist at TD Securities Inc. “We’re expecting Canadian dollar selling overall today.”
Canada’s currency lost 18 percent last year, its worst on record, as the U.S. economy crumbled and global demand for commodities, which account for about half the nation’s export revenue, collapsed. Crude oil for March delivery traded today at $41.63 a barrel, down more than $100 from the record in July.
The yield on the two-year government bond rose two basis points, or 0.02 percentage point, to 1.41 percent. The price of the 2.75 percent security due in December 2010 decreased 4 cents to C$102.40.
