Canadian Currency Reaches Strongest in Three Years Amid Growth Speculation

Canada’s dollar reached the strongest level in more than three years versus its American counterpart as job growth in the U.S., the nation’s biggest trade partner, fueled bets the global recovery is quickening.

The currency strengthened for a fifth straight day, the longest rally in three months, as stocks and commodities rose. It gained versus most major peers as crude oil, Canada’s biggest export, touched a 30-month high after Chinese economic data spurred speculation demand will expand in the world’s biggest energy user.

“The global economy is more robust than we might have thought, and it lends itself toward supporting the Canadian dollar,” said David Watt, senior currency strategist at Royal Bank of Canada’s RBC Capital Markets unit in Toronto. “The U.S. data seems to suggest that our major trading partner is doing better, which is helping the Canadian dollar.”

Canada’s currency, nicknamed the loonie for the image of the aquatic bird on the C$1 coin, appreciated 0.8 percent to 96.32 cents per U.S. dollar at 5 p.m. in Toronto, from 97.06 cents yesterday. It touched 96.26 cents, the strongest level since Nov. 15, 2007. One Canadian dollar buys $1.0382.

The loonie reached the strongest level since it was first allowed to float in 1950, 90.58 cents, on Nov. 7, 2007, as the collapse of the U.S. subprime-mortgage market disrupted financial markets and weakened the greenback.

The currency gained 2.8 percent over the past three months, its third straight quarterly advance.

Bonds Fall

Government bonds declined, pushing the yield on the benchmark 10-year note up two basis points, or 0.02 percentage point, to 3.37 percent. The price of the 3.5 percent security maturing in June 2020 fell 15 cents to C$101.05.

The top performers today against the U.S. dollar included the Brazilian real, the loonie, the Mexican peso, Norway’s krone and the New Zealand dollar. All are currencies of nations that produce commodities for export.

Canada’s dollar appreciated as much as 1.1 percent against the euro, the biggest intraday jump since Feb. 14, to C$1.3592 before trading at C$1.3714. The loonie rose as much as 2.5 percent versus the yen, the largest intraday gain since March 18, when Group of Seven central banks intervened to stabilize the Japanese currency after it surged following a record earthquake. Central banks intervene by selling or buying currencies to influence prices.

The Canadian dollar strengthened 2 percent over the past six months in the Bloomberg Correlation-Weighted Currency Indexes, a measure of 10 developed-nation currencies. The euro fell 0.8 percent and the yen tumbled 5.3 percent, while the greenback lost 4.2 percent.

Weekly Gain

The Canadian currency was gained the most in a week against the greenback in five months, 1.8 percent, as commodities and equities gained.

Crude oil for May delivery rose as much as 1.6 percent to $108.47 a barrel in New York, the highest since September 2008. The Thomson Reuters/Jefferies CRB Index of raw materials gained 0.4 percent. Raw materials, including oil, account for about half of Canada’s export revenue.

The Standard & Poor’s 500 Index advanced 0.5 percent, and the MSCI World Index increased 0.5 percent.

U.S. payrolls increased by 216,000 workers last month after a revised 194,000 gain the prior month, the Labor Department said today in Washington. Economists projected a March gain of 190,000, according to the median estimate in a Bloomberg News survey. The jobless rate dropped to a two-year low of 8.8 percent, from 8.9 percent in February.

‘Strong Risk Story’

“What’s good for the U.S. is good for Canada,” said Rahim Madhavji, president at Knightsbridge Foreign Exchange Inc. in Toronto. “It’s a strong risk story, a strong commodity story, that’s causing the Canadian dollar to creep higher.”

The data bolstered speculation, encouraged by some policy makers, that the U.S. Federal Reserve may curtail stimulus efforts. Fed Bank of Philadelphia President Charles Plosser said today a stronger rebound in growth or inflation could require the bank to begin withdrawing stimulus. St. Louis Fed President James Bullard also said this week it may need to be cut back.

“It’s certainly a possibility” the central bank may have to raise interest rates before the end of this year, Plosser told reporters after a speech in Harrisburg, Pennsylvania.

The Fed, which meets April 27, is buying $600 billion of Treasuries through June to spur the recovery. It has kept the U.S. benchmark at zero to 0.25 percent since December 2008.

“The data this week has been consistent with the hawkish rhetoric coming from the Fed and validates what we’ve heard,” said Omer Esiner, chief market analyst in Washington at Commonwealth Foreign Exchange Inc., a currency brokerage.

Bank of Canada

The Bank of Canada, which meets April 12, has kept its benchmark rate at 1 percent since September after raising it three times last year. Policy makers reiterated on March 1 after their last meeting that “considerable slack” remains in the economy. Exporters face “considerable challenges” from a currency trading near a three-year high, they said.

European Central Bank officials have said they may raise their key rate on April 7 from 1 percent to fight inflation.

China’s Purchasing Managers Index rose to 53.4 in March from 52.2 in February, the China Federation of Logistics and Purchasing said in a statement on its website today. It’s the first time in four months manufacturing growth has gained.

To contact the reporter on this story: Alexandra Harris in New York at aharris48@bloomberg.net

To contact the editor responsible for this story: Dave Liedtka at dliedtka@bloomberg.net

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.