BLBG: Canadian Dollar Rises to 3-Week High as Global Factory Strength Buoys Risk
The Canadian currency rose to the highest level in more than three weeks versus its U.S. counterpart as evidence of manufacturing strength in America, China and India buoyed higher-yielding assets.
The loonie, as the Canadian dollar is also known, is one of the best performers in the past three months against the greenback among the most-traded currencies, trailing the Australian and New Zealand dollars. The Canadian currency extended its gain today after a report showed U.S. manufacturing grew in December at the fastest pace in six months.
“People are putting more risk on,” said Chris Walker, a currency strategist at UBS AG in London.
The Canadian dollar appreciated 1 percent to C$1.0088 per U.S. dollar at 10:45 a.m. Toronto time. The loonie advanced as much as 1.1 percent to C$1.0077, the strongest level since Dec. 8. One Canadian dollar buys 99.12 U.S. cents.
The Standard & Poor’s 500 Index rallied on its first trading day of the year, climbing 2.1 percent, while Canada’s benchmark S&P/TSX Composite Index (SPTSX) added 1.6 percent. Futures on crude oil, Canada’s biggest export, soared 3.5 percent to $102.57 a barrel in New York trading.
The yield on 10-year Government of Canada bonds increased four basis points, or 0.04 percentage point, to 1.98 percent. The price of the 3.25 percent securities maturing in June 2021 fell 36 cents to C$110.87.
Canada’s currency may extend gains if it closes stronger than C$1.0171 per U.S. dollar today, George Davis, chief technical analyst at Royal Bank of Canada’s RBC Dominion Securities Inc. in Toronto, said in a note to clients.
‘Trend Reversal’
A close in the greenback below that level “would generate a bearish medium-term trend reversal that would signal a shift in sentiment,” Davis wrote.
The Canadian currency got a boost as the Institute for Supply Management’s U.S. factory index climbed to 53.9 last month from 52.7 in November. Fifty is the dividing line between growth and contraction.
Reports this week showed output in Australia grew for the first time in six months as well as a pickup in China’s and India’s manufacturing.
The loonie has risen 1.7 percent in the past month, according to Bloomberg Correlation-Weighted Indexes, a gauge of 10 developed-nation currencies. The U.S. currency has gained 0.4 percent, and the yen has appreciated 2.2 percent.
To contact the reporters on this story: Chris Fournier in Halifax, Nova Scotia, at cfournier3@bloomberg.net; Frederic Tomesco in Montreal at tomesco@bloomberg.net
To contact the editor responsible for this story: Dave Liedtka at dliedtka@bloomberg.net
