BLBG: Canadian Dollar Set for Biggest Weekly Decline Since January
Canada’s dollar headed for the biggest weekly decline since January on concern global economic growth won’t resume soon, damping demand for commodity-linked currencies.
The currency, known as the loonie, dropped as much as 0.7 percent today as reports showed Europe’s economy contracted at the fastest pace in at least 13 years in the first quarter and New Zealand’s retail sales fell almost twice as much as economists forecast. Crude oil fell while U.S. stock futures declined. Canadian manufacturing shipments unexpectedly fell in March to the lowest level since May 1999.
“Bearish data in New Zealand along with substantially weaker Q1 growth numbers in the euro zone, Germany and France are contributing to the bearish sentiment in currency and equity markets,” said Jack Spitz, managing director of foreign exchange at National Bank of Canada in Toronto. “The current environment is likely to see the loonie dominated by external macro influences.”
Canada’s currency weakened 0.4 percent to C$1.1743 per U.S. dollar at 9:11 a.m. in Toronto, from C$1.1691 yesterday. One Canadian dollar buys 85.15 U.S. cents. The currency has declined 2.1 percent this week, the biggest drop since the five days ended Jan. 16. It rose for the past six weeks.
Crude oil for June delivery fell 1.7 percent to $57.64 a barrel. U.S. stock futures on the Standard & Poor’s 500 Index expiring in June slipped 0.4 percent.
Factory Shipments
Factory sales in Canada declined 2.7 percent in March from the prior month to C$41.4 billion ($35.2 billion), Statistics Canada said today in Ottawa. Economists surveyed by Bloomberg News forecast the shipments would gain 1 percent, the median of 20 estimates. Sales have plunged by about a quarter since peaking in July, the agency said.
“This paints a gloomy picture for the economy,” said Matthew Strauss, a senior currency strategist at RBC Capital Markets Inc. in Toronto, a unit of Canada’s biggest bank by assets. “Fortunately, the market has priced that in. The Canadian dollar falls into the broad market move today, which is risk aversion.”
Gross domestic product in the 16-member euro region dropped 2.5 percent from the fourth quarter, when it fell 1.6 percent, the European Union’s statistics office in Luxembourg said. That’s the biggest drop since the euro-area GDP data were first compiled in 1995 and exceeded the 2 percent decline economists expected in a Bloomberg News survey.
In New Zealand, retail sales, adjusted for inflation, fell a record 2.9 percent in the first quarter, from the previous three months. The median estimate of nine economists surveyed by Bloomberg was for a 1.5 percent decline.
The loonie will weaken to C$1.19 against the U.S. dollar by year-end, according to the median forecast in a Bloomberg survey of 43 economists.
