BS: Canadian Dollar Rally Stalls After Biggest Daily Gain Since June
The Canadian dollar declined against the majority of its most-traded peers after posting its biggest one-day gain since June as risk aversion rose and technical measures suggested the rally may be losing momentum.
The U.S. dollar may strengthen against its Canadian counterpart this week if it fails to break a trend line at 97.40 cents, according to FX360.com, a foreign-exchange research and analysis website.
“The Canadian dollar is trying to find a base around these levels,” Blake Jespersen, managing director of foreign exchange in Toronto at Bank of Montreal (BMO), said in telephone interview. “We’ve seen over the past month or so on a day where we do see an outsize move, the next day is very quiet and it consolidates for a few days.”
Canada’s currency dropped 0.3 percent to 98.09 cents per U.S. dollar at 10:17 a.m. in Toronto. The loonie, as the currency is nicknamed for the image of aquatic bird on the C$1 coin, advanced 0.9 percent yesterday, the biggest increase since June 29. One Canadian dollar buys $1.01947.
“The selloff of the Canadian dollar suggests that the market may be satisfied with the re-pricing of interest rate expectations in Canada after Bank of Canada Governor Mark Carney’s dovish-leaning comments on Monday,” George Davis, chief technical analyst for fixed income and currency strategy in Toronto at Royal Bank of Canada, said in a note to clients.
The Canadian dollar weakened the most in about three months against on Oct. 16 after Carney suggested he may reduce his economic outlook and delay raising policy interest rates during his quarterly economic forecast next week.
Bonds Advance
The currency passed below its 50-day moving average this month for the first time since July. The loonie is trading at a 98.31 short-term moving average, compared with a 50-day average of 99.53 one month ago.
“It’s going to be a fairly range-bound session,” Jespersen said. “It continues to bump off these lows we’ve seen over the past few weeks here, the 97.50-97.60 level. Dollar Canada is trying to find a base around these levels and we don’t expect it to go any lower in the short-term.”
Canadian bonds advanced, with the yield on the 10-year benchmark note declining two basis points, or 0.02 percentage point, to 1.89 percent. The price of the 2.75 percent securities rose 21 cents to C$107.55.
The Standard & Poor’s 500 equities index declined 0.2 percent, snapping three days of gains. Oil, Canada’s largest commodity, lost 1.3 percent to trade at $90.90 a barrel. The S&P GSCI Index of 24 raw materials lost 0.7 percent.
The loonie has added 1.5 percent this year against nine developed-nation currencies tracked by Bloomberg Correlation- Weighted currency Indexes. The greenback has declined 3 percent, the second biggest decliner after the yen.
To contact the reporter on this story: Katia Dmitrieva in Toronto at edmitrieva1@bloomberg.net
To contact the editor responsible for this story: Dave Liedtka at dliedtka@bloomberg.net
