Canada’s dollar appreciated versus its U.S. counterpart for the first time in three days after an advance in global equities and commodities including copper made currencies tied to growth more attractive.
The Canadian currency’s decline on June 30 capped its first quarterly drop in more than a year as Europe’s sovereign-debt crisis and a faltering economic recovery in North America increased refuge demand for the greenback and yen.
“The risk-off trade was at an extreme last week,” John Curran, senior vice president at CanadianForex Ltd., an online foreign-exchange dealer, said by phone from Toronto. He linked the trades to some expectations for a “double-dip” recession. “Those fears are overstated at this point,” Curran said.
The currency strengthened as much as 1.4 percent, the most on an intraday basis since June 10, to C$1.0486 per U.S. dollar, before trading at C$1.0545 at 5 p.m. in Toronto. It closed at C$1.0634 yesterday, after it touched C$1.0677, the weakest level since June 7. One Canadian dollar buys 94.84 U.S. cents.
The Canadian dollar will trade between C$1.02 and C$1.08 during the next three months, Curran said, and advised: “Play those ranges until they break.”
The MSCI World Index, a measure of stocks in 24 developed nations, climbed 1.7 percent. September copper futures advanced 1.9 percent. The loonie, as Canada’s currency is known, tends to rise and fall with stocks and commodity prices.
The Canadian currency weakened to almost C$1.0680 during the past four sessions before being rebuffed, suggesting the level is forming “good resistance” for the U.S. dollar versus the Canadian, said Jonathan Gencher, director of foreign exchange sales at Bank of Montreal. Resistance refers to the upper boundary of a trading range, where sell orders may be clustered.
The C$1.0550 level “should still provide initial support,” Toronto-based Gencher wrote today in a note to clients. The currency pair “is not likely to deviate much from its current range ahead of the Bank of Canada’s rate announcement on July 20,” he said.
In June, Bank of Canada Governor Mark Carney became the first Group of Seven central banker to raise interest rates, increasing the Bank of Canada’s target level to 0.5 percent from a record low of 0.25 percent. Policy makers meet again on July 20 and in September, October and December.
Canadian government bonds were little changed. The 10-year note rose 5 cents to C$103.64 and yielded 3.07 percent.
The Bank of Canada tomorrow will sell C$3 billion ($2.9 billion) of 2 percent bonds maturing in September 2012. The central bank’s June 2 auction of two-year notes drew an average yield of 1.928 percent, and a bid-to-cover ratio of 2.395, according to data on the bank’s website.
Canada’s dollar stayed higher, even after a Statistics Canada report showed building permits tumbled 10.8 percent, the most since February 2009, to C$5.98 billion. Economists surveyed by Bloomberg News predicted a 2 percent decline, based on the median of 13 responses. The value of permits has fallen in five of the past seven months.