BLBG:Canadian Dollar Rises as Rally in Crude Oil Eases Risk Aversion
The Canadian dollar increased the most in December against its U.S. counterpart as a rally in crude oil and stocks eased risk aversion.
The loonie, as the Canadian currency is also known, remained higher after a government report showed the nation’s annual inflation rate was unchanged in November. Canada’s currency was supported by a U.S. report on housing starts that indicated the economy of the nation’s biggest trading partner is getting stronger.
“Oil and positive news from the equity world are providing a bit of a lift today,” said C.J. Gavsie, managing director for currency trading at Bank of Montreal, in a phone interview from Toronto. “Based on the latest Canadian numbers, we are seeing a stable economic picture here. The Canadian dollar is benefiting from that.”
The loonie appreciated 0.9 percent to C$1.0298 per U.S. dollar by 5 p.m. Toronto time. It rose as much as 1.2 percent, the most on an intraday basis since Nov. 30. One Canadian dollar buys 97.11 U.S. cents.
Futures on crude oil, Canada’s biggest export, rallied 3.8 percent to $97.59 a barrel in New York. The Standard & Poor’s 500 Index increased 3 percent, while Canada’s S&P/TSX Composite Index added 1.5 percent.
Ten-year Government of Canada bonds fell for the first time in seven days, pushing yields up 9 basis points, or 0.09 percentage point, to 1.95 percent. The price of the 3.25 percent securities due in June 2021 dropped 82 cents to C$111.39.
Canadian Inflation
The consumer price index rose 2.9 percent in November from a year earlier, Statistics Canada reported today, matching the median forecast of 22 economists in a Bloomberg News survey. On a monthly basis, consumer prices rose 0.1 percent, also in line with economists’ expectations and down from a 0.2 percent pace in October.
The annual core inflation rate, which excludes eight volatile items such as gasoline, was also unchanged in November, matching October’s 2.1 percent pace, Statistics Canada said.
U.S. housing starts increased 9.3 percent to a 685,000 annual rate, the most since April 2010, Commerce Department figures showed today in Washington.
Yields on the six-month Canadian overnight index swap, a security based on what investors expect the central bank’s rate will average during that period, rose to 0.909 percent today, from 0.891 percent yesterday, indicating traders are reducing expectations for interest-rate cuts.
A drop in June 2012 bankers’ acceptances, a barometer of short-term interest-rate expectations, pushed yields up five basis points to 1.07 percent, the highest level this month.
No ‘Rush’
“I don’t think the Bank of Canada is in a rush to raise rates at this point,” Krishen Rangasamy, senior economist at National Bank in Montreal, said in a telephone interview.
Bank of Canada policy makers have kept the key interest rate at 1 percent since September 2010. Lower interest rates make a country’s currency less attractive to foreign investors.
Although Europe’s widening debt crisis is raising risks to the global economy, there is “considerable monetary stimulus” in Canada with interest rates near historic lows and the financial system “functioning well,” policy makers led by Bank of Canada Governor Mark Carney said in a Dec. 6 statement.
The loonie has depreciated 2.9 percent in 2011, according to Bloomberg Correlation-Weighted Currency Indexes. The drop is the biggest among 10 developed-nation currencies on concern European sovereign-debt turmoil will discourage demand for Canada’s raw materials. The greenback has appreciated 1 percent, and the yen has added 4 percent.
To contact the reporter on this story: Frederic Tomesco in Montreal at tomesco@bloomberg.net
To contact the editor responsible for this story: Dave Liedtka at dliedtka@bloomberg.net
