BLBG: Canada Dollar Gains to Highest Since October on Greenback Drop
Canada’s dollar rose to the highest in more than seven months as traders shunned the U.S. currency on concern the creditworthiness of the world’s largest economy is deteriorating.
The Canadian currency headed for its biggest weekly gain since October as commodity-linked currencies surged. The U.S. Dollar Index fell to the lowest this year.
“The extent of the rally is quite astonishing,” said Matthew Strauss, a senior currency strategist at RBC Capital Markets in Toronto. “If U.S. dollar weakness continues, it could have far-reaching implications not only for the Canadian dollar, but for currencies across the world.”
The Canadian dollar, known as the loonie, strengthened as much as 1.5 percent to C$1.1205 per U.S. dollar, the highest level since Oct. 9. It traded at C$1.1252, up 1.1 percent, at 11:06 a.m. in Toronto, compared with C$1.1374 yesterday. One Canadian dollar buys 88.87 U.S. cents.
The Dollar Index, used by the ICE to track the U.S. currency versus the euro, yen, pound, Swiss franc, Canadian dollar and Swedish krona, declined 0.4 percent to 80.182 after touching 79.858, the lowest this year.
Pacific Investment Management Co.’s Bill Gross said yesterday the U.S. will “eventually” lose its AAA credit rating. The administration of President Barack Obama will sell a record $3.25 trillion of debt in the fiscal year ending Sept. 30 to fund a growing budget deficit, according to a Goldman Sachs Group Inc. estimate.
‘Shock’ to U.S.
“If the AAA rating is lost, then long-term interest rates would have to go up in order to encourage investment,” said Aaron Fennell, a Toronto-based futures and currency broker at MF Global Canada Co. “That would really be a shock to the U.S. economy.” Fennell recommended buying Canada’s currency on dips.
The loonie extended gains after Statistics Canada said today the nation’s retail sales rose for a third straight month in March. Overall sales advanced 0.3 percent to C$33.9 billion ($30 billion). Economists expected a 0.5 percent increase in March, based on the median of 21 estimates.
Canada’s dollar climbed 4.7 percent since May 15, the most since the week ended Oct. 31. After reaching a four-year low on March 9, it gained 16 percent as investors stepped out of havens to seek higher-yielding assets such as stocks amid signs the global economic slowdown is moderating.
The dollars of New Zealand and Australia, which like the Canadian currency tend to track fluctuations in commodity prices and stocks, gained 5.9 percent and 4.8 percent, respectively, against the greenback over the past five days.
Crude oil for July delivery rose as much as 1.5 percent to $61.98 a barrel on the New York Mercantile Exchange. Prices are up 37 percent this year. Crude, natural gas and other energy products accounted for 25 percent of Canada’s export revenue last year.
North American stocks rose, with the Standard & Poor’s 500 Index gaining 0.6 percent.
