BLBG: Canadian Dollar Fluctuates As European Talks Spur Risk Aversion
Canada’s dollar fluctuated versus its U.S. counterpart, as concern European efforts to help resolve the region’s debt crisis may stall reduced the appeal of higher-yielding assets.
The currency was headed for the first weekly loss in seven after a retail sales report earlier this week trailed economists’ expectations, capping a string of disappointing domestic economic indicators this month. Canada’s dollar touched 98.43 cents per U.S. dollar on Aug. 21, the strongest level since May 3.
“The Canadian dollar likely got ahead of itself when it was rallying,” said Camilla Sutton, chief currency strategist at Bank of Nova Scotia (BNS)’s Scotiabank unit in Toronto. “A slew of weak domestic data and growing concern over both U.S. and global growth are hampering Canadian-dollar strength.”
Canada’s currency, nicknamed the loonie, was little changed at 99.31 cents per U.S. dollar at 8:22 a.m. in Toronto. It approached yesterday’s 99.49 level, the lowest since Aug. 10. One Canadian dollar buys $1.007.
Futures for crude oil, Canada’s largest export, fluctuated. Futures on the Standard & Poor’s 500 Index slipped 0.2 percent.
The Canadian dollar appreciated this week to the highest level since May 3 amid speculation European policy makers are close to putting a recovery plan in place. Global stocks fell today as two central bank officials said the European Central Bank may wait until a German court ruling before unveiling full details of a plan to buy government bonds.
Equity Correlation
The loonie has a 30-day correlation coefficient of 0.81 with the S&P 500 index. A reading of 1 would indicate they move in lockstep. The correlation with crude oil is 0.62.
Implied volatility for one-month options on the U.S. dollar versus the Canadian currency remained close to the lowest level since May 2007 at 6.5 percent. The five-year average is 12 percent. Implied volatility, which traders quote and use to set option prices, signals the expected pace of currency swings.
Government bonds rose, pushing the yield on 10-year bonds down two basis points to 1.8 percent. The price of the 2.75 percent securities maturing in June 2022 increased 20 cents to C$108.50.
Statistics Canada said earlier this week that wholesale sales fell 0.1 percent and retail sales dropped 0.4 percent in June, versus median estimates in separate Bloomberg News surveys calling for gains of 0.3 percent and 0.1 percent.
To contact the reporter on this story: Chris Fournier in Halifax at cfournier3@bloomberg.net
To contact the editor responsible for this story: Dave Liedtka at dliedtka@bloomberg.net
