Canada’s dollar gained the most in three weeks versus its U.S. counterpart as stocks rose and the Bank of Canada said it expects growth to resume in the second half of 2011, cooling bets it will cut interest rates this year. The currency advanced for a second day as policy makers held the target for overnight loans between banks at 1 percent, as forecast by all 27 economists in a Bloomberg News survey. Canadian and U.S. equities gained on speculation President Barack Obama’s plan to pump $300 billion into the economy will bolster growth. Crude oil, Canada’s biggest export, reached a one-month high. “Markets in general are stronger, as are oil prices, and the Canadian dollar is just following the broader trend,” Camilla Sutton, Scotia Capital chief currencies strategist, said in a telephone interview from Toronto. “Risk appetite seems to be back a bit.” The Canadian currency gained 0.7 percent to 98.33 cents per U.S. dollar at 5 p.m. in Toronto, the most since Aug. 15, from 99.05 cents yesterday. One Canadian dollar buys $1.0165. The currency fell against the Australian and New Zealand dollars. Canadian bonds dropped, pushing the yield on the 10-year note up three points, or 0.03 percentage point, to 2.27 percent. It tumbled to a record low 2.22 percent yesterday. The price of the 3.25 percent securities maturing in June 2021 decreased 28 cents to C$108.54. Stocks, Oil The Standard & Poor’s 500 Index rallied 2.9 percent, while Canada’s benchmark Standard & Poor’s/TSX Composite Index gained 1.6 percent, each snapping a three-day losing streak. Crude oil for October delivery rose as much as 5.2 percent to $90.48 a barrel in New York, the highest level since Aug. 4. Canada’s dollar remained higher versus the greenback earlier after central-bank Governor Mark Carney said while growth is likely to resume this year, there’s less need for a rate increase now as Europe’s debt crisis and a slow U.S. rebound hobble the global recovery. “They’re saying the need to raise has diminished, not disappeared,” said Shaun Osborne, chief currency strategist at Toronto-Dominion Bank’s TD Securities unit, by phone from Toronto. “The market was looking for something dovish.” Goldman Sachs Group Inc. forecast yesterday the central bank will cut its benchmark rate to 0.5 percent by year-end. The central bank will probably keep the rate there through next year because of weak output growth, Andrew Tilton, a New York-based economist at Goldman Sachs, wrote in an e-mail. September 2010 Policy makers have held Canada’s benchmark rate at 1 percent since September 2010 after raising it last year from a record low 0.25 percent. “In light of slowing global economic momentum and heightened financial uncertainty, the need to withdraw monetary policy stimulus has diminished,” policy makers led by Carney, 46, said in a statement today. The loonie, as the currency is nicknamed for the image of the aquatic bird on the C$1 coin, reached an 11-week high on July 19 after the central bank’s last policy meeting, when Carney signaled interest rates might rise. Investors began raising bets on a September increase before reversing course and starting to price in amid slowing growth in North America and concern Europe’s fiscal crisis was worsening. “Whereas the Bank of Canada seemed to be thinking about a rate increase as recently as a few weeks ago, it no longer wants to move fast,” said Francois Belanger, director of foreign- exchange sales at Bank of Montreal’s BMO Capital Markets unit, in a telephone interview from Montreal. “The signal policy makers gave this morning is that the pause could be longer than what people had been expecting.” GDP Fell Global stocks tumbled last month, with the MSCI World Index dropping 7.3 percent. Statistics Canada reported Aug. 31 that gross domestic product fell at a 0.4 percent annualized rate in the second quarter, making Canada the only Group of Seven country besides Japan to contract from April through June. Data reported two days later showed that employers in the U.S., Canada’s biggest trading partner, added no jobs in August. It was the weakest reading of the data since September 2010. Federal Reserve Bank of Chicago President Charles Evans said today in a speech in London that the U.S. central bank should move “aggressively” to reduce unemployment, even at the cost of temporarily pushing inflation higher. Obama plans to unveil his proposals for promoting job growth in an address to a joint session of Congress tomorrow. In a letter to House Speaker John Boehner, the president said the nation faces “unprecedented” economic challenges. “The U.S. economy is stalled,” said Belanger at BMO Capital. “Too many people are out of work. It’s going to take concrete actions to right this ship.” The loonie fell versus the currencies of Australia and New Zealand, which like Canada are commodities exporters. Canada’s currency declined 0.4 percent to 81.81 cents per New Zealand dollar, and dropped 0.9 percent to C$1.0483 to the Aussie. To contact the reporters for this story: Frederic Tomesco in Montreal at tomesco@bloomberg.net; Chris Fournier in Halifax, Nova Scotia, at cfournier3@bloomberg.net. To contact the editor responsible for this story: Dave Liedtka at dliedtka@bloomberg.net

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