The Canadian dollar rose against its U.S. counterpart as crude oil, the nation’s biggest export, pared a decline and the euro fell against most major currencies on concern Europe’s debt crisis will slow economic growth. Canada’s currency, dubbed the loonie for the aquatic bird on the C$1 coin, trimmed annual and monthly losses against the greenback. The Canadian dollar may gain further today as institutional investors buy and sell currencies for year-end positioning. “I would expect anyone positioning for 2012 would be lightening up on euro exposure and adding to other exposure, especially that of strong sovereigns like Canada,� said Camilla Sutton, head of currency strategy at Bank of Nova Scotia in Toronto. “It’s always good to start off the year positioned the way you want to be.� The loonie rose 0.2 percent to C$1.0180 per U.S. dollar at 10:30 a.m. Toronto time, after earlier falling 0.2 percent. It touched C$1.0126 two days ago, the strongest since Dec. 8. One Canadian dollar buys 98.23 U.S. cents. Canada’s dollar was little changed against the euro, which was down against the majority of its most-traded peers, after yesterday reaching its highest level since January. The loonie is the second-worst performer this year after the euro among the 10 major currencies tracked by Bloomberg Correlation Weighted Indexes. The Standard & Poor’s 500 Index declined 0.2 percent. Futures on crude oil declined 0.3 percent to $99.34 a barrel in New York after earlier falling 1.2 percent. Euro Falls Europe’s shared currency dropped below 100 yen for the first time since June 2001 after Spain said its budget deficit will reach 8 percent of gross domestic product this year, more than the previous forecast of 6 percent. Luxembourg’s Jean- Claude Juncker, who leads the group of euro-area finance ministers, said economic growth in the euro region “isn’t good� and the world economy is growing only in some Asian and African countries. Canada’s dollar is averaging above par with its U.S counterpart this year for the first time in more than three decades. The currency maintained an average of 98.91 Canadian cents per U.S. dollar in 2011, according to daily closing prices, the highest annual value since 1976, when it traded at 98.85 Canadian cents, according to Bloomberg data. Implied volatility for one-month options on the Canadian dollar versus the greenback rose for a sixth day to as high as 11.1 percent, the most since Dec. 16. Implied volatility, which traders quote and use to set option prices, signals the expected pace of swings in the underlying currency. The measure has averaged 10 percent this year. Government Bonds Canada’s government bonds (GCAN5YR) rose, with benchmark five-year yields steady falling 1 basis point, or 0.01 percentage point, to 1.25 percent as the price of the 2.75 percent security due in September 2016 increased to C$106.75. Canadian five-year bonds yielded 41 basis points above equivalent-maturity U.S. securities. The so-called spread hit 33 basis points on Dec. 27, the narrowest this year. It was as wide as 77 basis points in July. The nation’s government bonds have returned 9.6 percent this year, the most since 2008, according to Bank of America Merrill Lynch data. Canada’s currency has fallen 0.1 percent this month and 2 percent this year against its U.S. counterpart. It strengthened to 94.07 cents per U.S. dollar, a more than three-year high, on July 26 and weakened to C$1.0658 on Oct. 4. It will depreciate to C$1.04 by the end of the first quarter before rebounding to parity by year-end, according to median forecasts of 33 analysts and economists in a Bloomberg survey. Those forecasts compared with C$1.02 and 98 Canadian cents at the end of November. To contact the reporter on this story: Chris Fournier in Montreal at cfournier3@bloomberg.net To contact the editor responsible for this story: Robert Burgess at bburgess@bloomberg.net

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