Canada’s dollar gained the most since December versus its U.S. counterpart after consumer prices rose in May more than forecast, prompting traders to ratchet up bets the central bank will resume raising interest rates. The currency strengthened versus the majority of its 16 most-traded peers as stocks and commodities rose after Greek lawmakers approved a package of austerity measures to help the euro region avert its first sovereign-debt default. Crude oil, Canada’s biggest export, reached a two-week high. “Way above expectations,” said C.J. Gavsie, managing director for foreign-exchange trading at Bank of Montreal’s BMO Capital Markets unit in Toronto, referring to the inflation figures. “This is all just adding together with the Greek news. We’re off to the races with a strong Canadian dollar.” The loonie, as the Canadian currency is also known for the image of the aquatic bird on the C$1 coin, appreciated 1.1 percent to 97.02 cents per U.S. dollar at 12:02 p.m. in Toronto, from 98.12 cents yesterday. It gained the most on an intraday basis, 1.24 percent, since a 1.42 percent jump on Dec. 2. One Canadian dollar purchases $1.0307. The loonie headed for a 0.2 percent loss for June and was little changed for the quarter. Consumer prices climbed 3.7 percent in May from a year earlier, the fastest since 2003, Statistics Canada data showed in Ottawa today. The gain exceeded all 24 forecasts in a Bloomberg News survey of economists, whose median prediction was for an increase of 3.3 percent, the same as in April. The core inflation rate, which excludes eight volatile items such as gasoline, accelerated to 1.8 percent from a year earlier. Economists had forecast it would slow to 1.5 percent. Greek Vote The euro fluctuated versus the greenback, which fell against most of its major peers, after Greece’s parliament passed Prime Minister George Papandreou’s 78 billion euro ($112 billion) package of budget cuts and state asset sales as police fired tear gas at protesters. The measures were needed before the nation can tap a fifth portion of last year’s rescue and win a second aid package. “Take this as an opportunity to buy the U.S. dollar” against the Canadian dollar, said John Curran, a senior vice president in Toronto at CanadianForex Ltd., an online currency dealer. “The streets of Greece are the reality of the situation; the market reaction is not the reality. Anyone who’s looking forward and not knee-jerk reacting is going to see that the Greek situation is long term and growth concerns are long term.” Interest Rate The Bank of Canada kept its benchmark overnight lending rate at 1 percent on May 31, where it has been since September. Policy makers are expected to raise the rate to 1.5 percent by year-end, according to forecasts compiled by Bloomberg. December 2011 bankers’ acceptances, the most active contract, yielded 1.46 percent, the most in more than a week, after falling to 1.36 percent on June 24, the lowest closing price since they started trading in December 2008. The yield on so-called Baxes averages about 18 basis points above the central bank’s overnight target, Bloomberg data since 1992 show. A government report tomorrow may show Canada’s economy shrank in April, with gross domestic product contracting 0.1 percent from the previous month, according to the median of 22 forecasts compiled by Bloomberg. GDP grew 0.3 percent in March. “Any fear about rates that has crept into the market in the aftermath of the CPI data may be tempered by the GDP data tomorrow,” said Shaun Osborne, chief currency strategist at Toronto-Dominion Bank’s TD Securities unit in Toronto. “It’s expected to be weak and underscore the headwinds facing the economy.” Seasonal Pressure While today’s CPI number gives the central bank “food for thought,” much of the pressure appears to be seasonal and the core inflation rate remains below the bank’s target of 2 percent, Osborne said. “There’s no urgency for the Bank of Canada at this stage,” he said. The Standard & Poor’s 500 Index increased 0.8 percent. Crude oil for August delivery gained as much as 3.2 percent to $95.84 a barrel in New York, the highest level since June 15, before trading at $95.55. To contact the reporter on this story: Chris Fournier in Montreal at cfournier3@bloomberg.net To contact the editor responsible for this story: Dave Liedtka at dliedtka@bloomberg.net

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