BLBG:Canadian Dollar Touches a Two-Week High on Growth Outlook for China
Canada’s dollar reached the strongest level in two weeks against its U.S. counterpart as faster-than-forecast growth in China bolstered demand for higher-yielding assets.
The currency dropped against a majority of its most traded counterparts as the Bank of Canada left interest rates unchanged and reiterated that European governments are struggling to manage a fiscal crisis. Global equities and crude oil advanced.
“Markets are fairly buoyant,” Blake Jespersen, director of foreign exchange at Bank of Montreal in Toronto, said in a telephone interview. “The Canadian dollar is benefiting from that.”
Canada’s currency touched C$1.0113 per U.S. dollar, the strongest since Jan. 4. It ended 0.3 percent higher at C$1.0151 in Toronto. One Canadian dollar purchases 98.51 U.S. cents.
Government bonds rose, with the benchmark 10-year yield at 1.91 percent, down two basis points. The price of the 3.25 percent security rose 14 cents to C$111.41.
The C$1.0080 level provides “tremendous support” for the U.S. dollar versus the loonie, and greenback buyers will emerge if the loonie strengthens to that point, Jespersen said. Support refers to the lower boundary of a trading range, where buy orders may be clustered.
The Ottawa-based central bank left its target for overnight loans between commercial banks at 1 percent, where it has been since September 2010, as forecast by all 26 economists surveyed by Bloomberg News. Economic growth will be “more modest” amid a weaker outlook for the U.S. and Europe, policy makers said.
‘On the Sidelines’
“They recognize that it looks like a deeper, longer European recession than what they thought in October,” Shane Enright, executive director at Canadian Imperial Bank of Commerce’s CIBC World Markets, said by phone from Toronto. “They seem comfortably on the sidelines. That’s where the market thought they would be, and you’ve seen that reflected in the currency, which has shown very little reaction.”
The currency, nicknamed the loonie, rose to 94.07 Canadian cents per U.S. dollar on July 26, the strongest level since November 2007, on speculation the Bank of Canada would lift interest rates as the global economy expanded. Since then it has depreciated to as low as C$1.0658 on concern Europe’s sovereign- debt crisis may spark another liquidity crunch.
The Canadian dollar will extend its gain against the yen as U.S. economic resilience and a rally in crude oil support demand for the currency, according to RBS Securities Inc.’s Robert Sinche.
China Expansion
China’s economy expanded 8.9 percent in the fourth quarter from a year earlier, the nation’s statistics bureau said. A Bloomberg News survey forecast an 8.7 percent gain. China is the world’s second-largest oil consumer after the U.S. It is also the biggest buyer of iron ore and copper.
Canada derives about half its export revenue from the sale of raw materials such as crude, coal, natural gas, wheat, lumber and gold.
The Standard & Poor’s 500 Index (MXWO) climbed 0.4 percent. The MSCI World Index of equities in developed nations rose 0.1 percent. Crude oil for February delivery advanced 2 percent to $101 a barrel.
To contact the reporter on this story: Chris Fournier in Montreal at cfournier3@bloomberg.net
To contact the editor responsible for this story: Dave Liedtka at dliedtka@bloomberg.net
