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Canadian Dollar Advances Most This Week as Equities, Crude Oil Show Gains
Canada’s dollar appreciated against its U.S. counterpart the most in almost three months as global equities and commodities such as crude oil strengthened, making currencies tied to growth more attractive.
The loonie, as the currency is nicknamed, posted its weakest monthly performance in more than a year in August, dropping 3.4 percent versus the greenback, based on concern that the worldwide economic recovery is faltering. It rose today by the most since June after reports showed manufacturing in the U.S. and China expanded at a faster pace in August, lifting risk sentiment.
“New month, better data, new attitude,” Jack Spitz, managing director of foreign exchange at National Bank of Canada, said by phone from Toronto. “There’s been a fairly widespread bid to equities.”
The Canadian currency, nicknamed the loonie for the aquatic bird’s image on the one-dollar coin, rose 1.4 percent to C$1.0508 per U.S. dollar at 4:13 p.m. in Toronto, compared with C$1.0656 yesterday. It gained as much as 1.6 percent, the biggest intraday increase since June 2. One Canadian dollar buys 95.17 U.S. cents.
“Risk is on,” said Spitz, citing better-than-forecast data on Australian economic growth and Chinese manufacturing.
Triple Top
The MSCI World Index, a gauge of equities in 24 developed nations, climbed as much as 2.8 percent, the most since May. Crude for October delivery rose as much as 3.6 percent to $74.48 a barrel in the New York Mercantile Exchange.
Canada’s dollar may rally after its U.S. counterpart failed yesterday to strengthen beyond an “impenetrable” level of C$1.0679, the third time since June the triple-top barrier has held, Royal Bank of Canada said.
For the greenback against the loonie, as the two currencies are known, “downside risk has increased over the short term, as yesterday’s failure to pierce key resistance at C$1.0679 hangs over the market,” George Davis, chief technical analyst for fixed-income and currency strategy in Toronto at Royal Bank’s RBC Capital Markets, wrote in a note to clients.
A triple top occurs when a currency makes three consecutive peaks around the same height on a chart, often foreshadowing a decline. In technical analysis, investors and analysts study charts of trading patterns and prices to forecast changes in a security, commodity, currency or index.
Canada’s dollar gained 1.7 percent to 80.33 yen, the biggest intraday increase since July 20’s 2.2 percent advance, after falling to as low as 78.56 yen yesterday, the lowest since Aug. 24.
Yen Cross
“The Canadian-dollar cross to watch is CAD-yen,” Spitz said. “At 78.50 it’s showing signs of basing.”
Canada’s government bonds dropped, boosting the 10-year note’s yield 7 basis points, or 0.07 percentage point, to 2.85 percent. The price of the 3.5 percent security maturing in June 2020 slumped 65 cents to C$105.52.
Government bonds have made investors 7.1 percent this year, according to a Bank of America Merrill Lynch index.
Canada auctioned C$1.4 billion ($1.3 billion) of 30-year bonds, drawing an average yield of 3.489 percent. The government received bids of C$3.2 billion for the 4 percent securities maturing in June 2041, according to a statement today on the Bank of Canada’s website.
To contact the reporter on this story: Chris Fournier in Montreal at cfournier3@bloomberg.net
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