BLBG: Canadian Dollar Rises From Two-Week Low On Stimulus Speculation
Canada’s dollar rose from the lowest level in two weeks on speculation central banks will consider increasing monetary stimulus to spur economic growth, boosting higher-risk assets.
The currency earlier fell to the lowest since July 12 on concern Europe’s debt crisis is worsening. Commodities such as crude oil, Canada’s largest export, rose after European Central Bank council member Ewald Nowotny said there were arguments favoring giving the region’s rescue fund a banking license.
“There’s more positive sentiment,” Steve Butler, managing director in Toronto at Scotiabank, said by e-mail. “It’s giving the market hope that there will be some policy action, either in the U.S. or Europe or both.”
Canada’s currency, nicknamed the loonie, climbed 0.4 percent to C$1.0182 per U.S. dollar at 9:18 a.m. in Toronto. The currency has lost 0.2 percent this month versus the greenback. One Canadian dollar buys 98.23 cents.
Butler said he bought Canadian dollars today as a “short- term play.” The loonie may weaken to between C$1.035 and C$1.040 per U.S. dollar eventually, while “on days like today, you can’t fight the herd,” Butler said.
Stocks, Oil
Futures on the Standard & Poor’s 500 Index advanced climbed 0.6 percent. Crude for September delivery rose as much as 0.8 percent to $89.16 in New York. Canada’s currency, which is up about 0.3 percent this year versus the greenback, tends to rise and fall with stocks and commodity prices.
Government bonds fell for the first time in four days. The benchmark 10-year yield rose two basis points, or 0.02 percentage points, to 1.59 percent, as the price of the 2.75 percent security due in June 2022 declined 21 cents to C$110.49.
Canada will sell C$2.6 billion of 10-year bonds today. The securities mature in June 2023. The previous auction of 10-year bonds, on June 6, drew an average yield of 1.765 percent and a bid-to-cover ratio -- the amount bid relative to the amount offered -- of 2.37 times, according to Bank of Canada data. The five-auction average ratio is 2.43 times.
Granting a banking license to the ESM would give it access to ECB lending, easing concern its 500 billion-euro cash reserves won’t be enough if Spain or Italy require aid amid the worsening debt crisis.
Nowotny’s comments “caused a spike in the euro and a risk rally in general,” said Blake Jespersen, managing director of institutional foreign-exchange sales in Toronto at Bank of Montreal, in an e-mail. “The Canadian dollar benefited from that.” Jespersen is “getting long U.S. dollars at C$1.0120 with an overall view that Canadian dollar gains are capped for the summer.” A long position is a bet that an asset will increase in value.
To contact the reporter on this story: Chris Fournier in Halifax at cfournier3@bloomberg.net
To contact the editor responsible for this story: Robert Burgess at bburgess@bloomberg.net
