BLBG: Canada Dollar Climbs Against Most Major Peers on U.S. Growth Optimism
Canada’s dollar strengthened against most of its major counterparts on speculation accelerating growth in the U.S. will boost exports, increasing odds of interest-rate increases.
Canada’s currency gained on its U.S. peer as equities advanced. It climbed to the highest versus the yen since July after Bank of Japan (8301) Governor Masaaki Shirakawa indicated the central bank will keep its monetary easing policy in place. The Canadian dollar strengthened after a report showed U.S. retail sales increased in February.
“The Canadian dollar will hold up, given its exposure to the U.S. and the fact that the U.S. data is outperforming,” said Ian Stannard, head of European currency strategy at Morgan Stanley in London. “We’re seeing a lot of positive surprises coming from the U.S. That suggests the Canadian dollar will remain relatively well-supported.”
Canada’s currency, nicknamed the loonie, appreciated 0.2 percent to 99.09 cents per U.S. dollar at 10:55 a.m. in Toronto. One Canadian dollar buys $1.0092.
Government bonds fell, pushing the yield on the 10-year benchmark up three basis points, or 0.03 percentage point, to 2.03 percent. Two-year note yielded 1.18 percent, two basis points higher.
Retail sales in the U.S. increased 1.1 percent last month, the most in five months, Commerce Department figures showed today. That matched the median estimate of 81 economists in a Bloomberg survey. That followed data on March 9 that showed U.S. nonfarm payrolls increased by 227,000 in February after rising by a revised 284,000 the prior month. The unemployment rate held at a three-year low of 8.3 percent.
Stocks Gain
The loonie strengthened as the Standard & Poor’s 500 index rose 0.7 percent.
“The Canadian dollar is quite sensitive to moves in the S&P 500,” said Mark McCormick, a New York-based currency strategist at Brown Brothers Harriman & Co. The currency is “much more sensitive to the S&P than most other drivers.”
The Bank of Canada on March 8 kept its main interest rate at 1 percent, extending the longest pause since the 1950s, and said there’s less slack in the economy amid easing global tensions and faster domestic spending that may lift prices. The central bank’s target rate has been at 1 percent since September 2010.
The yield on the September 2012 bankers’ acceptances contract, a barometer of short-term rate expectations, rose to 1.32 percent today, matching the March 9 level, which was the highest since October on a closing basis. The increasing yield reflects the expectations for higher interest rates.
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
