BLBG: Canadian Dollar Rallies to Two-Week High as Stocks, Oil Rise
By Mary Childs and Chris Fournier
June 2 (Bloomberg) -- Canada’s dollar advanced to the strongest level in more than two weeks versus the greenback as gains in stocks and crude oil, the nation’s largest export, spurred demand for assets linked to economic growth.
The Canadian currency, known as the loonie, gained against all of its most-traded counterparts as U.S. equity benchmark indexes rebounded amid speculation yesterday’s drop in energy shares overshot risks from the Gulf of Mexico oil spill.
“The roaring loonie,” said Matthew Strauss, senior currency strategist at Royal Bank of Canada in Toronto. “We saw risk appetite starting to come back last night and gaining momentum during the U.S. equity trading session. Oil’s up by more than a dollar again. That’s the more important reason for the strength of the Canadian dollar.”
The Canadian currency appreciated 1.6 percent to C$1.0388 per U.S. dollar at 4:08 p.m. in Toronto, compared with C$1.0554 yesterday. It touched $1.0372, the strongest level on an intraday basis since May 18. One Canadian dollar buys 96.27 U.S. cents.
The Standard & Poor’s 500 Index climbed 2.6 percent. Crude oil for July delivery rose as much as 1.9 percent. The loonie tends to follow movements in stocks and crude oil.
‘Qualified Hawkish’
“This might be the top right here” for the Canadian dollar, said Frank Pavilonis, senior market strategist in Chicago at Lind-Waldock, the retail arm of futures broker MF Global. “I don’t think it’s going to get to par with the dollar again. It’s not good for their economy. They’re probably going to try to intervene if it does go to parity again.”
The Canadian dollar fell yesterday as the Bank of Canada raised its benchmark interest rate by a quarter-percentage point and said any further increases will be “weighed carefully” against growth in Canada and elsewhere, prompting traders to trim bets on the pace of the bank’s tightening.
“Yes, the Bank of Canada did issue a qualified hawkish statement,” said RBC’s Strauss said. “But it is clear that the preference is to continue to normalize rates going forward. In no way did they indicate they have the intention to move to the sidelines. They just qualified it by saying it depends on domestic and global development.”
Canadian employers added 15,000 jobs last month, after a gain of 108,700 in April, according to the median of 19 forecasts in a Bloomberg survey. Statistics Canada is due to release the report on June 4 at 7 a.m. in Ottawa.
Government Bonds
Canada’s dollar lost 2.1 percent in May versus the greenback as concern that some countries in Europe might be unable to meet debt obligations drove investors from higher- yielding assets to the perceived safety of the U.S. dollar and the yen. The loonie is still the second-best performer against the greenback this year among its 16 most-traded counterparts.
Shorter-term government bonds fell, pushing the yield on the government of Canada two-year bond up by five basis points, or 0.05 percentage point, to 1.76 percent. The price of the 1.5 percent security due in June 2012 slipped 10 cents to C$99.49.
Canada auctioned C$3 billion ($2.9 billion) of notes maturing in two years, drawing an average yield of 1.928 percent.
The government received bids of C$7.2 billion for the 2 percent securities maturing in September 2012, according to a statement today on the Bank of Canada’s Web site.
To contact the reporter on this story: Chris Fournier in Montreal at cfournier3@bloomberg.net
