Nov. 21 (Bloomberg) -- Canada’s currency registered its first weekly decline this month amid speculation that a rally in higher-yielding assets such as stocks may have gone too far to be sustained.

The Canadian dollar fell against 13 of its 16 most-traded counterparts tracked by Bloomberg, gaining only against the currencies of New Zealand, Australia and South Africa. All four track with swings in stocks and commodities. The U.S. dollar rose against all but two major currencies as investors’ appetite for risk waned.

“It’s been a pretty good week for the U.S. dollar in general,” said Sacha Tihanyi, a currency strategist in Toronto at Bank of Nova Scotia, Canada’s third-largest lender. Looking at the Canadian dollar and the other low-performing currencies this week shows “the evidence of risk aversion is all there.”

The Canadian currency depreciated 1.8 percent to C$1.0706 per U.S. dollar yesterday in Toronto, from C$1.0516 on Nov. 13. It fell four straight days this week, the longest losing streak since Sept. 2, and touched C$1.0733, the weakest level since Nov. 9. The currency last posted a five-day loss on Oct. 30. One Canadian dollar buys 93.41 U.S. cents.

Traders will be watching next week’s reports on Canada’s retail sales and current account for clues on the direction of currency markets, Tihanyi said. The Canadian dollar, nicknamed the loonie for the image of the aquatic bird on the C$1 coin, is up 14 percent this year.

‘Unusually Direct’

The Dollar Index, which InterContinental Exchange Inc. uses to track the greenback against the currencies of six major U.S. trading partners including Canada, touched the lowest since August 2008 on Nov. 16. It rebounded to end the week with a 0.3 percent gain after Federal Reserve Chairman Ben S. Bernanke said the central bank’s policy will help support a “strong” dollar.

“Bernanke’s unusually direct references to the level of the U.S. dollar and its relevance in policy decisions brought at least temporary relief for the” greenback, Adam Cole, London- based global head of currency strategy at Royal Bank of Canada, wrote in a note to clients yesterday. The firm is Canada’s biggest lender. Even so, Cole wrote, until U.S. interest rate increases are imminent, “there is little any one central bank, including the Fed, can do to stop the U.S. dollar falling.”

The loonie will strengthen to C$1.04 by year-end, according to the median forecast of 37 economists and analysts surveyed by Bloomberg News.

Global stocks fell for the first week in three. The MSCI World Index, a gauge of equities in 23 developed nations, dropped 1.1 percent, and the Standard & Poor’s 500 Index declined 0.2 percent.

‘Better Bid’

Crude oil for December delivery slid 3.6 percent over the last two trading days this week to $76.72 a barrel on the New York Mercantile Exchange. Crude, Canada’s largest export, gained 72 percent this year.

The loonie has one-year correlation coefficients of 0.70 with the MSCI World and 0.46 with crude oil. Readings of 1 would mean they move in lockstep.

“The U.S. dollar is better bid across the board, while the commodity and growth-leveraged currencies are again the laggards as the market appears reluctant to take on any new risk,” Jonathan Gencher, Toronto-based director of foreign-exchange sales at Bank of Montreal, wrote yesterday in a note to clients. Traders appear “content to take risk off the books as we head into year-end.”

‘Exaggerated Moves’

U.S. financial markets will be closed on Nov. 26 for the Thanksgiving holiday. That may lead to “exaggerated moves in thinner markets,” said Michael Leavitt, a Montreal-based institutional-derivatives broker at MF Global Canada Co.

Bank of Canada Governor Mark Carney said on Nov. 19 after a speech in New York he’s still comfortable with the central bank’s cost-of-living projection. Carney said last month inflation won’t return to his 2 percent target until the third quarter of 2011 because of “slack” in the economy.

Canadian consumer prices posted their first annual increase in five months in October, ending the longest streak of declines since 1953, Statistics Canada said Nov 18.

Government bonds rose, pushing the 10-year Canadian note’s yield lower for the week by 10 basis points, or 0.10 percentage point, to 3.38 percent. It touched 3.34 percent, the lowest level since Oct. 8. The price of the 3.75 percent security maturing in June 2019 increased 78 cents to C$102.99. Canadian government debt lost investors 0.6 percent this year, according to a Merrill Lynch index.

Retail sales likely rose 0.6 percent in September, after a 0.8 percent gain in August, according to the median forecast of 16 economists in a Bloomberg survey. Statistics Canada is due to release the data at 8:30 a.m. on Nov. 23.

The nation’s current account deficit widened to C$13.3 billion ($12.3 billion) in the third quarter, from C$11.2 billion in the April-through-June period, according to the median forecast in a separate survey. The report is due Nov. 27.

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

Last Updated: November 21, 2009 00:01 EST