Canada’s dollar strengthened versus its U.S. counterpart for a second day as commodities including crude oil climbed, fueling demand for higher-yielding assets. The loonie, as Canada’s currency is sometimes known for the image of the aquatic bird on the C$1 coin, erased earlier losses versus the greenback as the Thomson Reuters/Jefferies CRB Index of 19 raw materials gained as much as 2.6 percent and crude oil topped $100 a barrel. Raw materials including oil account for about half of Canada’s export revenue. “The CRB has rallied; it’s had a huge move today,” said Andrew Busch, a global currency strategist at Bank of Montreal’s BMO Capital Markets unit in Chicago. “People are saying, Australia and Canada, the guys who export a lot of this, are going to benefit.” The Canadian currency appreciated 0.2 percent to 97.01 cents versus the U.S. dollar at 5 p.m. in Toronto, after falling as low as 97.59 cents in earlier trading. Yesterday the loonie touched 97.94 cents, the weakest level since March 28. One Canadian dollar buys $1.0308 U.S. cents. Toronto-Dominion Bank’s TD Securities unit has moved back its forecast for the next Bank of Canada interest-rate increase to September, from July, according to David Tulk, chief Canada macro-strategist at TD Securities, in a comment on the outlook for borrowing costs in a report sent to clients yesterday. The central bank’s target rate for overnight loans between commercial banks has been 1 percent since September. Not in ‘Hiking Mode” “I don’t think people are really viewing the Bank of Canada in hiking mode just yet,” said Brian Kim, a currency strategist at UBS AG in Stamford, Connecticut, referring to the likelihood of the Bank of Canada raising interest rates. UBS predicts the Canadian dollar will depreciate to C$1.05 versus the U.S. currency by the end of the year. The Bank of Canada will wait longer because policy makers are “concerned with the risks of fiscal contraction in the United States and a deceleration in growth across emerging- market economies,” the note said. The yield on September 2011 bankers’ acceptances ended yesterday at 1.46 percent, matching the lowest level on a closing basis since March 16, when it was also 1.46 percent. The contract was at 1.47 percent today. So-called Bax contracts average about 18 basis points, or 0.18 percentage point, above the central bank’s overnight target, Bloomberg data since 1992 show. Jeremy Stretch, executive director and head of currency strategy at Canadian Imperial Bank of Commerce’s CIBC World Markets unit in London, said the firm is maintaining its forecast for the central bank to raise rates in July, “but obviously as the global backdrop deteriorates, the burden of proof for central bankers gets higher.” Carney’s View Bank of Canada Governor Mark Carney said in Ottawa earlier this week that “while many emerging economies have begun raising interest rates and applying other restrictive measures, monetary policies remain quite stimulative.” Underlying inflation remains “subdued,” though increases in energy and food prices will keep the rate as measured by the consumer price index above 3 percent for the “short term” before it slows to the bank’s 2 percent target in the middle of 2012, Carney said in the speech. Inflation accelerated to a 3.4 percent annual pace last month from 3.3 percent in March, according to the median forecast of 27 economists in a Bloomberg survey. The report from Statistics Canada on consumer prices is due May 20. Oil Gains Futures on crude oil, Canada’s biggest export, rose as much as 4.2 percent to $100.99 a barrel in New York after dropping yesterday to $96.91, the lowest settlement since Feb. 22. The MSCI World Index of developed-nation stocks gained 1 percent after falling 1.2 percent last week. Government bonds dropped for the first time in four days, driving the five-year yield up six basis points, or 0.06 percentage point, to 2.54 percent. The price of the 2 percent security due in June 2016 dropped 29 cents to C$97.49. Canada sold C$3.5 billion ($3.6 billion) of five-year debt today, drawing an average yield of 2.567 percent. The government received bids of C$9.1 billion for the 2.75 percent securities maturing in September 2016, according to a statement on the Bank of Canada’s website. Canadian wholesale sales and Statistics Canada’s index of leading economic indicators both advanced, with gains tempered by weakness in consumer spending. Wholesale sales rose 0.1 percent in March, the Ottawa-based agency said, below all 18 responses in a Bloomberg News survey of economists that had a median forecast of a 1.2 percent advance. The agency’s index of leading economic indicators increased 0.8 percent in April, compared with the 0.6 percent gain that economists had forecast. “We had a weak wholesale sales number, and that hurt” the loonie, Busch said in a telephone interview. “That’s maybe why it’s been a laggard.” To contact the reporters on this story: Chris Fournier in Halifax, Nova Scotia, at cfournier3@bloomberg.net; John Detrixhe in New York at jdetrixhe1@bloomberg.net To contact the editor responsible for this story: Dave Liedtka at dliedtka@bloomberg.net

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