Canada’s dollar strengthened against its U.S. counterpart for a second day after inflation unexpectedly accelerated in September, lessening concern that the central bank may cut interest rates in the next few months. Canada’s consumer price index increased 3.2 percent in September from a year earlier, compared with an August rate of 3.1 percent and a May peak of 3.7 percent, Statistics Canada said today in Ottawa. Economists surveyed by Bloomberg News predicted a 3.1 percent reading according to the median of 25 estimates. “The implication for the Bank of Canada next week is that with rising inflationary pressures, it limits their ability to shift interest rates,” Camilla Sutton, chief currency strategist at Scotia Capital in Toronto, said in a telephone interview. “That will take away some of that pressure from the system, which is positive for the currency.” Canada’s currency rose 0.3 percent to C$1.0121 per U.S. dollar at 7:47 a.m. in Toronto. One Canadian dollar buys 98.80 U.S. cents. Bank of Canada policy makers will make their next rate decision Oct. 25. The central bank will keep its rate unchanged at 1 percent, according to all eight economists surveyed by Bloomberg. Bonds Fall The yield on 10-year Government of Canada bonds rose four basis points, or 0.04 percentage point, to 2.35 percent. The price of the 3.25 percent securities maturing in June 2021 declined 32 cents to C$107.73. The yield dropped on Aug. 18 to 2.25 percent, the lowest level in Bloomberg data beginning in 1989. Futures on crude oil, Canada’s biggest export, climbed 1.9 percent to $86.94 a barrel in New York trading. Spot gold rose 0.6 percent to $1,630.34 an ounce in London. European Union policy makers are considering combining the region’s temporary and planned permanent rescue funds as of mid- 2012, while scrapping a ceiling on bailout spending, two people familiar with the discussions said. Finance ministers meet in Brussels today to lay the groundwork for meetings of government leaders. “There’s a lot of hesitation in the market and the focus is really on Europe these days,” Sutton said. “People are mainly waiting for European news this weekend and into Wednesday.” The Canadian dollar has weakened 4.1 percent this year, according to Bloomberg Correlation-Weighted Currency Indexes, a gauge of 10 developed-nation currencies. The greenback has declined 2.7 percent, while the yen has gained 3.6 percent. To contact the reporters for this story: Frederic Tomesco in Montreal at tomesco@bloomberg.net To contact the editor responsible for this story: Dave Liedtka at dliedtka@bloomberg.net

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