BLBG:Canadian Dollar Reaches Strongest in a Week on U.S. Economic Recovery
Canada’s currency touched its strongest level in more than a week versus the dollar after reports showed the economic recovery gaining momentum in the U.S., the nation’s largest trading partner.
The Canadian dollar gained for a fourth consecutive day as a report showed the nation’s gross domestic product grew by less than 0.1 percent in October. U.S. durable-goods orders rose the most in four months in November, after data yesterday showed a drop in jobless-benefit claims. Crude oil posted its biggest weekly gain in almost two months and global equity prices rose.
“The U.S. economy is looking a bit more resilient even though it’s growing at moderate levels,” said Eric Viloria, senior currency strategist for Gain Capital Group LLC in New York. “The Canadian dollar is responding more to the overall risk environment.”
The loonie, as the currency is nicknamed, was little changed at C$1.0203 at 5 p.m. Toronto time, after earlier reaching C$1.0181, the strongest level since Dec. 12. One Canadian dollar buys 98.01 U.S. cents.
The currency posted its biggest five-day gain in three weeks. It has fallen 2.2 percent this year versus its U.S. counterpart.
Canadian government bonds fell, pushing the yield on the two-year benchmark up two basis points, 0.02 percentage point, to 0.92 percent. It reached 0.94 percent, the highest since Dec. 2. The 1 percent security fell four cents to C$100.17.
Stocks Correlation
The Standard & Poor’s 500 rose 0.9 percent and the S&P/TSX Composite Index gaining 0.4 percent. Crude oil, Canada’s largest export, rose 0.4 percent to $99.889 a barrel and 6.5 percent on the week.
Movements in the Canadian dollar have been increasingly tied to equities. The one-month correlation coefficient between the gauge of U.S. equities and the Canadian dollar reached 0.9348 on Nov. 14, the strongest relationship since Bloomberg data began in 1992, versus an average since then of 0.2426. A reading of 1 indicates the measures move in lockstep. The reading was 0.853 today.
Real GDP increased less than 0.1 percent on a seasonally adjusted basis, Statistics Canada said today in Ottawa. Economists forecast a 0.1 percent gain, based on the median estimate of a Bloomberg survey with 23 responses. Output had increased for four months before October, with a gain of 0.2 percent in September.
‘Less Tarnished’
“In terms of regional growth, the fact that North America is the less tarnished button is supportive,” said Stewart Hall, senior currency strategist at Royal Bank of Canada in Toronto. “There is some room that you see Canada be one of the better performing currencies in 2012 based on those broad themes.”
The nation’s federal budget deficit dropped by 46 percent in October as corporate income-tax revenue surged, the finance department said. The deficit in the first seven months of the fiscal year that began April 1 shrank to C$15.4 billion from C$21.5 billion.
The loonie is down 1.7 percent this year for the worst performance in Bloomberg Correlation-Weighted Indexes after the Swedish krona. The yen has appreciated the most at 3.7 percent, followed by the U.S. dollar at 1.1 percent in the gauge of 10 developed-nation currencies.
To contact the reporter on this story: Allison Bennett in New York at abennett23@bloomberg.net
To contact the editor responsible for this story: Dave Liedtka at dliedtka@bloomberg.net
