Canada’s currency weakened from a six-week high against its U.S. counterpart after crude oil, its biggest export, fell the most this month. The currency, nicknamed the loonie, declined as crude oil, fell for the third day. The oil sands of Alberta, Canada’s fourth-most populous province, contain about 170 billion barrels of petroleum, the largest pool of reserves outside Saudi Arabia. Stocks weakened. “Dollar-Canada is tending to the weak side with oil and a bit of the risk-off move,” said Sacha Tihanyi, a currency strategist in Toronto at Bank of Nova Scotia. “All in all, it’s a mid-performer on the day.” The currency was little changed at C$1.0263 per U.S. dollar at 4:22 p.m. in Toronto, compared with C$1.0262 yesterday. On Sept. 13 it touched C$1.0216, the strongest since Aug. 6 One Canadian dollar buys 97.44 U.S. cents. The Standard & Poors 500 index fell as much as 0.5 percent while the S&P/TSX, Canada’s equity benchmark, rose 0.2 percent. Crude futures for October delivery fell 1.7 percent to $74.70 a barrel. The 30-day correlation between the currency and crude is 0.53. That number is 0.87 for the S&P 500 Index. A reading of 1 would indicate they move in lockstep. The loonie also weakened against the euro to the lowest in almost two weeks after a positive Spanish bond auction. The currency fell as much as 0.9 percent to C$1.3465 per euro. “The heads up is for risk-off today,” said Dean Popplewell, an analyst in Toronto at the online currency-trading firm Oanda Corp. “The focus today isn’t on dollar-Canada, the main focus this week has been central bank rhetoric.” Yen Reaction The loonie was little changed against the yen after yesterday’s 3.4 percent gain after Japan’s first sales in foreign-exchange markets since 2004. “The Bank of Japan needing to buy U.S. dollars and sell the yen demand will filter in to everything else,” said Blake Jespersen, director of foreign exchange in Toronto at Bank of Montreal. “We do expect dollar-Canada to remain fairly range bound until there’s clarity on whether the Bank of Japan is done for now or whether they could come in again.” The yen weakened to as much as 85.84 yen per dollar before trading at 85.74. The loonie is down 6 percent versus the yen this year. “I would say that dollar-Canada will be impacted in the event dollar-yen takes on a sustainable bid through initial resistance at 86,” said Jack Spitz, managing director of foreign exchange at National Bank of Canada in Toronto. The result would be the wide-spread buying of U.S. dollars, he said. Bond Yields Yields on Canada’s benchmark two-year bonds rose 2 basis points to 1.51 percent, as the price of the 2 percent security maturing in September 2012 fell 4 cent to C$100.93. The difference between short- and long-term bond yields in Canada has narrowed more than any other Group of Seven country over the past 12 months as higher interest rates threaten to slow the economy. A so-called flatter yield curve is typically a sign that investors don’t expect growth to be strong enough to spark inflation, allowing them to accept lower yields to own long-term debt relative to bonds with shorter maturities. Canada’s Conservative government will introduce three new measures in coming weeks to bolster the country’s economy, House Leader John Baird said, without elaborating today while speaking to reporters in Ottawa. The Bank of Canada lifted its benchmark overnight rate by a quarter percentage point to 1 percent last week, matching increases in June and July. The rate will be 1.75 percent by the middle of next year, according to the weighted average of 11 forecasts in a Bloomberg News survey. To contact the reporter on this story: Allison Bennett in New York at abennett23@bloomberg.net

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