Canada’s dollar snapped a five-day rally against its U.S. counterpart as crude oil, the nation’s largest export, declined, damping demand for higher-yielding currencies.
The Canadian dollar weakened against 15 of its 16 most- traded peers as Kuwait Petroleum Chief Executive Officer Farouk Al-Zanki said at a conference in Kuwait City that the country would prefer to see oil prices at $90 to $100 a barrel. The greenback gained versus most peers.
“The Canadian dollar is in a position where it’s unusually correlated with oil prices,” said Ravi Bharadwaj, a pricing analyst in Washington at Travelex Global Business Payments, a currency-exchange network. “A muted selloff this morning, plus a relatively benign calendar allowed investors to pare positions and set themselves up for the Reserve Bank of Australia meeting tomorrow, and the Bank of Japan and European Central Bank later this week.”
The Canadian currency, also known as the loonie for the image of the aquatic bird on the C$1 coin, depreciated 0.4 percent to 96.70 cents per U.S. dollar at 5 p.m. in Toronto, from 96.32 cents April 1. It touched 96.16, the strongest level since November 2007. One Canadian dollar buys $1.0341.
Futures traders increased their bets that the Canadian dollar will gain against the U.S. dollar, figures from the Washington-based Commodity Futures Trading Commission show.
The difference in the number of wagers by hedge funds and other large speculators on an advance in the Canadian dollar compared with those on a drop -- so-called net longs -- was 51,245 on March 29, compared with net longs of 45,977 a week earlier.
“The Canadian dollar is overbought and the U.S. dollar is oversold,” said George Davis, chief technical analyst for fixed income and currency strategy in Toronto at Royal Bank of Canada. “There was a period of U.S. dollar strength, which is when the dollar-Canada traded off its lows.”
Crude oil futures fell as much as 0.3 percent in New York before ending the day at $108.33 a barrel. It touched $108.78 a barrel, the highest since September 2008.
The loonie pared earlier gains as Minmetals Resources Ltd., a unit of China’s biggest metals trader, announced a $6.5 billion unsolicited cash offer for Equinox Minerals Ltd., a Perth-Australia-based mining company that controls the Luwana copper mine in Zambia. Lundin Mining Corp., a Toronto-based copper and zinc miner, rejected Equinox’s offer on March 20 and terminated an agreement with Inmet Mining Corp. last week.
“There’s more influence on the Canadian dollar coming from news of the Minmentals’ hostile bid,” said Jack Spitz, managing director of foreign exchange at National Bank of Canada in Toronto. “Whenever there’s an announcement of a merger or acquisition funded by cash, it’s likely to weigh on the Canadian dollar.”
Three-month copper on the London Metal Exchange gained as much as 1.2 percent to $9,475 a metric ton before falling 0.3 percent to $9,330 a metric ton.
The Bank of Canada’s quarterly survey of executives found the lowest gauge of future sales growth in two years, and more expected faster inflation.
Some 51 percent of companies said they expect faster sales growth during the next 12 months while 38 percent predicted slower growth, leaving a so-called balance of opinion of 13 percentage points, the Bank of Canada said today in its Quarterly Business Outlook Survey from Ottawa. The balance was the lowest since a reading of negative 22 in the first quarter of 2009.
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.
The loonie fell 0.2 percent against the Australian dollar as central bank Governor Glenn Stevens will tomorrow keep the cash rate target unchanged at 4.75 percent for a fourth meeting, according to a Bloomberg News survey of economists. Canada’s currency depreciated 0.3 percent against the euro to C$1.3750 as ECB President Jean-Claude Trichet signaled on March 3 that policy makers may raise interest rates from a record low 1 percent at their April 7 meeting.
The Canadian currency fell 1.5 percent during the past three months in the Bloomberg Correlation-Weighted Currency Indexes, a measure of the 10 developed-nation currencies. The euro rose 4 percent, while the greenback lost 4.7 percent.
Government bonds rose today, with the yield on the benchmark 10-year note falling one basis point, or 0.01 percentage point, to 3.35 percent. The price of the 3.5 percent security maturing in June 2020 rose 11 cents to C$101.16.
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