Canadian Dollar Drops as Crude Oil, Stocks Fall on Economic Slowdown Signs

Canada’s dollar depreciated against its U.S. counterpart, matching the longest losing streak since December 2007, on speculation a slowing recovery for the nation’s biggest trade partner curtailed demand.

The currency, also called the loonie for the image of the aquatic bird on the C$1 coin, gained versus 13 of its 16 most- traded peers this week after a government report yesterday showed Canada’s jobless rate unexpectedly fell in May to the lowest level since January 2009. Crude oil, Canada’s largest source of export revenue, and stocks declined. The Bank of Canada is scheduled to sell C$3.5 billion ($3.6 billion) of two- year debt June 15.

“We’ve been held back by what’s been going on in the United States,” said David Watt, senior currency strategist at Royal Bank of Canada’s RBC Capital Markets unit in Toronto. “If you look at the labor market statistics and a number of domestic statistics, Canada has been in a different world from the U.S.”

The Canadian dollar rose 0.2 percent to 97.99 cents per U.S. dollar, from 97.78 cents June 3. The currency also declined for the six straight weeks ending Dec. 14, 2007. One Canadian dollar buys $1.0205.

Canada’s unemployment rate fell to 7.4 percent last month from 7.6 percent in April, a Statistics Canada report showed yesterday in Ottawa. Employers added 22,300 jobs last month after an increase of 58,300 in April. The median forecast of 27 economists in a Bloomberg News survey was for a gain of 20,000.

Jobs Outlook

The loonie fell against the greenback on June 3 after U.S. Labor Department figures showed payrolls increased by 54,000 jobs in May after the addition of 232,000 in the previous month. The U.S. unemployment rate increased to 9.1 percent.

“It looks like the U.S. is hitting a soft patch, and everybody’s worried that might turn into something more,” said David Love, a trader of interest-rate derivatives at Le Groupe Jitney Inc. in Montreal. “Those numbers by themselves are not enough to change the underlining trend that’s been happening over the past couple of weeks,” he said referring to yesterday’s Canadian jobless data.

The loonie advanced on June 7 against the U.S. dollar after Federal Reserve Chairman Ben S. Bernanke said the U.S. central bank should maintain record monetary stimulus to boost a “frustratingly slow” economic recovery. Canada’s dollar dropped the next day after the Fed said the economy slowed in four of 12 regions of the U.S.

U.S. trade deficit unexpectedly narrowed in April, Commerce Department figures showed on June 9 in Washington. The gap shrank 6.7 percent to $43.7 billion, the lowest since December, compared with an estimated $48.8 billion gap, according to the median forecast a Bloomberg News survey of economists.

Trade Patterns

The release overshadowed a Statistics Canada report the same day that said the nation’s trade deficit was C$924 million ($945 million) in April, the widest in six months. Economists forecast a C$600 million surplus, the median estimate in a Bloomberg survey of 24 economists.

Government bonds fell, pushing yields up on the 10-year note by two basis points, or 0.02 percentage point, to 3 percent. The 3.25 percent securities maturing in June 2021 fell 15 cents to C$102.10.

Canada’s government on June 8 sold C$1.4 billion ($1.4 billion) of 30-year debt, drawing an average yield of 3.515 percent. The government received bids of C$3.3 billion for the 3.5 percent securities maturing in December 2045.

The Canadian dollar this week rose against the euro to C$1.4059. On June 8, it touched its lowest level against the shared currency since March 2010 after European Union and International Monetary Fund officials agreed last week to pay the next installment to debt-strapped Greece under last year’s 110 billion-euro ($158 billion) bailout.

Trichet Signals

European Central Bank President Jean-Claude Trichet yesterday signaled a slowing pace of interest-rate increases this year. The ECB said inflation next year will accelerate between 1.1 percent and 2.3 percent, compared with an earlier forecast of 1 percent to 2.4 percent.

“The euro continues to falter as the sovereign debt worries remain at the forefront,” said Dean Popplewell, an analyst at the online currency-trading firm Oanda Corp. in Toronto. “With that, individuals’ and investors’ risk tolerance certainly depreciates.”

Oil, Canada’s biggest export, fell 0.9 percent to $99.29 a barrel. Organization of Petroleum Exporting Countries Secretary General Abdalla el-Badri on June 8 said in Vienna there was no consensus on the group’s production limits, which have remained unchanged since 2009.

The Standard & Poor’s 500 Index tumbled for a sixth consecutive week, falling 2.2 percent this week. The Dow Jones Industrial Average extended its longest weekly slump in more than eight years.

“Canada’s ties with the United States are extremely strong,” Oanda’s Popplewell said. “Anything that’s positive for the U.S. tends to be positive for Canada. But at the moment, Canada is performing well across the crosses. Canada has been standing alone when it comes to fundamentals.”

To contact the reporter on this story: Cecile Vannucci in New York at cvannucci1@bloomberg.net

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

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