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Loonie Strengthens For the First Time in Three Days as Commodities Gain
Canada’s dollar advanced against its U.S. counterpart for the first time in three days on gains in oil, the nation’s largest export, and other commodities.
Canadian government bonds rose, pushing the yield on the benchmark 10-year note down for a second day. Crude oil futures rose for the first time in a week, and copper touched a 12-week high. The nation derives about half its export revenue from raw materials.
“With the bond markets rallying, that’s usually consistent with a weakening Canadian dollar,” said Eric Lascelles, chief economics and rates strategist at Toronto-Dominion Bank in Toronto. “The twist is that commodities are up.”
Canada’s dollar pared gains to C$1.0362 per U.S. dollar at 4:31 p.m. in Toronto, after earlier touching C$1.0303. It closed at C$1.0388 yesterday. One Canadian dollar buys 96.50 U.S. cents.
September futures on crude oil gained 1.6 percent to $78.21 a barrel in New York. Copper futures rose to $3.29 a pound. Earlier, the price reached $3.297, the highest level for a most- active contract since May 4. Natural gas futures climbed for a fourth day to $4.83 per million British thermal units.
The Standard & Poors 500 Index fluctuated, dropping 0.4 percent after earlier rising 0.9 percent. Canada’s dollar tends to track movements in stocks and commodity prices.
Canada will auction C$3.2 billion ($3.1 billion) of 3-year bonds on Aug. 4, according to a statement on the Bank of Canada’s website. The 2.5 percent securities mature in September 2013.
Rival Currencies
The Canadian dollar, known as the loonie for the aquatic bird on the one-dollar coin, is poised for a 2.6 percent gain against the greenback in July and has risen 1.6 percent this year, according to Bloomberg data.
The loonie lagged behind 10 of its 16 most-traded currencies this month. The Canadian currency fell 4.04 versus the euro since June 30. It has depreciated 1.71 against the pound.
“The U.S. dollar is weakening, and Canada doesn’t seem to be capitalizing all that effectively on that,” Toronton-based Lascelles said. “It’s not keeping pace with the European currencies or yen.”
Westpac Banking Corp. ended a bet that the Canadian dollar would rally to its strongest level this month against the Swiss franc after the loonie failed to rise above 1.05 francs amid weaker-than-expected economic data.
The Canadian dollar declined for a second day against its Swiss counterpart to 1.0051 francs.
“The fatal shot was a result of weak Canadian data,” Richard Franulovich, a senior strategist at Westpac in New York, wrote in a client note.
Factory Prices
Canadian 10-year government bonds yields fell 3.18 percent, the lowest yield in a week, from 3.23 percent yesterday.
A government report showed factory product prices dropped in June the most in more than a year, faster than a decline in raw-material costs.
The industrial product price index fell 0.9 percent in June from May, the most since May 2009, Ottawa-based Statistics Canada said. Primary metal prices fell 2.9 percent and petroleum and coal prices fell 2.3 percent. The figures suggest that factory profit margins narrowed in June.
For the 12 months ending in June, industrial prices rose 0.2 percent, the second such increase after more than a year of declines, the report said. The raw materials index fell 0.1 percent during that time, the first drop after seven prior gains.
To contact the reporter on this story: Alex Kowalski in New York at akowalski13@bloomberg.net;
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