BLBG: Canadian Currency Weakens on Speculation Advances Were Overdone
Canada’s dollar dropped after six straight weeks of gains as crude oil and stocks fell amid speculation that advances may have been overdone.
“The market is due for a bit of a sober second thought,” said Eric Lascelles, Toronto-based chief economics and rates strategist at TD Securities Inc., a unit of Canada’s second- biggest lender. Commodity-linked currencies “went up a long way last week and the market may be having a few second thoughts as to the magnitude of those moves.”
The Canadian currency weakened 0.8 percent to C$1.1588 per U.S. dollar at 10:08 a.m. in Toronto, from C$1.1494 on May 8. The loonie, as Canada’s dollar is known, climbed 3.1 percent last week. One Canadian dollar buys 86.30 U.S. cents.
The greenback rose against all but three of the 16 most traded currencies tracked by Bloomberg. The exceptions were South Korea’s won, Japan’s yen and the Taiwanese dollar.
Crude for June delivery fell as much as 3.2 percent to $56.78 a barrel on the New York Mercantile Exchange. Raw materials including oil accounted for 56 percent of Canada’s export revenue last year.
“We are seeing commodities under some pressure as oil is probably cashing in some past sharp gains,” said Sebastien Galy, a currency strategist at BNP Paribas Securities SA in New York. “It’s likely a bit of the case that fundamentals are not catching up as would be liked. It looks like the usual pullback after a sharp rise.”
Bonds Fall
The Standard & Poor’s 500 Index lost 1.8 percent, after rising 5.9 percent last week.
The 14-day relative strength indicator for the U.S. dollar against the Canadian dollar reached 27.3 on May 8, from 40.3 two weeks earlier. Readings below 30 and above 70 indicate a reversal may occur.
Canadian government bonds lost investors 0.5 percent so far this month, according to a Merrill Lynch & Co. indexes. The yield on the 10-year dropped two basis points, or 0.02 percentage point, to 3.14 percent today. It touched 3.23 percent on May 8, the highest since Dec. 1. The price of the 3.75 percent security due in June 2019 rose 20 cents to C$105.26.
