Sept. 10 (Bloomberg) -- Canada’s dollar advanced from the day’s low after a statement by central bank policy makers failed to signal an increase in concern that the currency’s strength threatens the nation’s economy.

The Bank of Canada’s policy statement today is “certainly not a big hurdle to further Canadian dollar appreciation,” said Shaun Osborne, chief currency strategist in Toronto at TD Securities Inc., a unit of the nation’s second-biggest bank.

The currency, nicknamed the loonie, was little changed at C$1.0772 per U.S. dollar at 5 p.m. in Toronto, from C$1.0785 yesterday. It earlier depreciated as much as 0.9 percent, the most on an intraday basis since Sept. 1, to C$1.0880. One Canadian dollar purchases 92.84 U.S. cents.

The currency remained little changed after Finance Minister Jim Flaherty projected cumulative deficits will total C$164.4 billion ($152 billion) by 2015, double what the government estimated in January.

“Persistent strength in the Canadian dollar remains a risk to growth,” Bank of Canada policy makers said in the statement. It echoed what they said after the bank’s July 21 meeting, that a higher Canadian dollar “is significantly moderating the pace of overall growth.”

The statement was “fairly bland, run-of- the-mill,” said TD’s Osborne. If the U.S. dollar moves below C$1.0780, markets will “retest” the low C$1.06s before heading to the C$1.05 area, he said.

‘Buy the Rumor’

The central bank left interest rates at a record low 0.25 percent, as all 21 economists in a Bloomberg News survey predicted. Bank Governor Mark Carney reiterated a pledge to hold the rate through June 2010, depending on the inflation outlook.

“We’re seeing a little ‘buy the rumor, sell the fact’ taking place now that the Bank of Canada is out of the way,” said Matthew Perrier, a director of foreign exchange in Toronto at BMO Capital Markets, a unit of Canada’s fourth-biggest bank. There was “little in the way of surprises.”

Flows from mergers and acquisitions, as well as corporate demand, have been “supportive” of the U.S. dollar against the loonie, said Steve Butler, director of foreign-exchange trading in Toronto at Scotia Capital Inc., a unit of Canada’s third- largest bank.

Regina, Saskatchewan-based Viterra Inc., Canada’s largest grain handler, won support yesterday from shareholders of ABB Grain Ltd. for its A$1.6 billion ($1.4 billion) takeover bid.

Relative Performance

Canada’s dollar was the fourth-worst performer against the greenback today among its 16 most-traded counterparts tracked by Bloomberg. The Australian dollar, which like Canada’s tends to rise and fall with commodity prices, rose 0.2 percent against the U.S. currency.

Crude oil for October delivery was at $72.14 a barrel in New York after swinging between gains and losses. Crude is Canada’s biggest export. North American stocks rose, with the Standard & Poor’s 500 Index gaining 1 percent after earlier declining 0.5 percent.

The loonie remained lower earlier after Statistics Canada reported the nation posted an unexpected trade deficit of C$1.43 billion ($1.32 billion) in July. The median forecast in a survey of economists by Bloomberg was for a C$100 million surplus.

Bond Auction

Canada will sell C$3 billion of two-year notes on Sept. 16, according to a statement on the Bank of Canada’s Web site today. The 1.25 percent securities mature in December 2011, according to the statement.

The yield on the government’s benchmark two-year security fell four basis points, or 0.04 percentage point, to 1.20 percent today. The price of the 1 percent security due in September 2011 rose 8 cents to C$99.60.

The yield on 10-year government bonds fell as much as 11 basis points, the most on an intraday basis since July 31, touching 3.32 percent before trading at 3.33 percent.

The drop in yields was due to “a good U.S. 30-year auction,” said Benoit Lalonde, vice president of fixed income at Laurentian Bank Securities in Montreal. “Supply is out of the way for now, and the Bank of Canada is indicating that monetary policy will stay loose at least until June 2010.”

The U.S. sold $12 billion of 30-year bonds today, drawing the strongest demand since November 2007. The securities yielded 4.238 percent, below the 4.289 percent forecast in a Bloomberg News survey, and the bid-to-cover ratio, which gauges demand by comparing total bids with the amount of securities offered, was 2.92, the highest in almost two years.

Parity With Greenback

Canada’s dollar may reach parity with its U.S. counterpart by year-end as economic growth in Asia boosts commodity prices, said David Rosenberg, chief economist at Gluskin Sheff & Associates Inc. in Toronto.

The loonie may strengthen as rising unemployment in the U.S. forces the government to adopt additional stimulus measures, further weakening the American currency, Rosenberg said in a telephone interview. Gluskin Sheff, a wealth manager, oversees $4 billion.

“If you’re going to give me a three- to six-month window, I would say it’s definitely achievable,” said Rosenberg, former North American chief economist at Merrill Lynch & Co., referring to Canada’s currency appreciating to C$1 per U.S. dollar. “It seems to me that the Asian economy is on a discernable upward track. That will be the tide that lifts the boat for the commodity complex.”

To contact the reporter on this story: Chris Fournier in Montreal at cfournier3@bloomberg.net

Last Updated: September 10, 2009 17:14 EDT