Canada’s dollar rose to a three-year high versus its U.S. counterpart and approached the strongest level since 1950 as speculation the global economic recovery is quickening fueled investor appetite for higher-yielding assets.
The currency had the biggest weekly gain since November as U.S. employers added more jobs in March than forecast and Chinese manufacturing accelerated. Oil and gold gained, and the Canadian dollar strengthened the most versus the yen during a week since 2009. Canada’s employers added jobs for a sixth month, a report next week may show.
“Risk has been the theme of this week,” Brian Dolan, chief strategist at FOREX.com, a unit of online currency trading firm Gain Capital in Bedminster, New Jersey. “Oil prices are holding firm, gold prices are holding firm.”
The Canadian dollar, nicknamed the loonie for the image of the aquatic bird on the C$1 coin, appreciated 1.8 percent, the most since the five days ended Nov. 5, to 96.32 cents per U.S. dollar yesterday in Toronto, from 98.05 cents on March 25. It touched 96.26 cents, the strongest level since Nov. 15, 2007. One Canadian dollar buys $1.0382.
The loonie’s strongest level since it was allowed to float in 1950, 90.58 cents, was reached on Nov. 7, 2007, as the collapse of the U.S. subprime-mortgage market disrupted financial markets and weakened the greenback.
Government bonds fell, pushing 10-year note yields up the most in eight weeks. The yield on the benchmark note climbed 13 basis points, or 0.13 percentage point, to 3.37 percent. The price of the 3.5 percent security due in June 2020 dropped 99 cents to C$101.05. Two-year note yields rose 10 basis points to 1.83 percent.
Canada will sell C$3.5 billion of two-year notes on April 6, according to a statement on the Bank of Canada’s website.
The greenback, Swiss franc and yen, traditionally considered refuge currencies, were the worst performers among major currencies as stocks and commodities rose. The Standard & Poor’s 500 Index increased to its highest level since February and gained 1.4 percent for the week.
Crude oil, Canada’s biggest export, climbed to a 30-month high. Crude for May delivery increased 2.8 percent to $108.31 a barrel in New York, the highest level since September 2008.
The Reuters/Jefferies CRB Index of raw materials increased 0.4 percent in its second consecutive weekly gain, and gold advanced for a second week. Raw materials including oil and gold account for about half of Canada’s export revenue.
The Canada dollar-yen trade also helped the loonie strengthen this week, FOREX.com’s Dolan said.
“That’s the ultimate sign that risk is back on,” he said.
The Canadian currency had the biggest gain versus Japan’s currency since the five days ended July 17, 2009. The loonie advanced 5.2 percent to 87.26 yen amid concern the nation’s economy will be suffer in the aftermath of the March 11 earthquake and tsunami.
Canada’s dollar has gained 8.9 percent versus the yen since the day before the Group of Seven nations’ central banks intervened March 18 to stabilize the Japanese currency after it surged following the quake. Central banks intervene by selling or buying currencies to influence prices.
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 yesterday. It was the first time in four months manufacturing growth has gained.
U.S. payrolls added 216,000 workers last month, more than forecast, after a revised 194,000 gain the prior month, Labor Department data showed yesterday. Economists in a Bloomberg News survey projected an increase of 190,000. The jobless rate dropped to a two-year low of 8.8 percent, from 8.9 percent.
‘Good for Canada’
“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.”
The data bolstered speculation, encouraged by some U.S. policy makers, that the Federal Reserve may curtail stimulus efforts. Fed Bank of Philadelphia President Charles Plosser said yesterday a stronger rebound in growth or inflation could require the bank to begin withdrawing stimulus.
The Fed, which meets April 27, is buying $600 billion of Treasuries through June to spur the recovery. It has kept the key U.S. interest rate at zero to 0.25 percent since 2008.
The Bank of Canada, which meets April 12, has kept its benchmark at 1 percent since September after raising it three times last year. Policy makers reiterated on March 1 that “considerable slack” remains in the economy. Exporters face “considerable challenges” from a currency trading near a three-year high, they said.
Employers in Canada added 29,000 jobs in March after an increase of 15,100 in February, according to the median forecast in a Bloomberg survey before government data due April 8.
The loonie gained even as campaigning accelerated in the nation’s fourth election in seven years after Prime Minister Stephen Harper’s government fell in March. The vote is May 2.
“People are still in love with the Canadian dollar,” said John Curran, a senior vice president in Toronto at CanadianForex Ltd., an online foreign-exchange dealer. “Obviously the political ramifications aren’t affecting it negatively. The story remains unchanged.”
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