Canada’s Dollar Fluctuates as Crude Oil Futures Depreciate
Canada’s dollar was little changed against its U.S. counterpart as a decline in crude oil countered a rally in equities.
The currency traded within one cent of parity with the greenback earlier on demand for higher-yielding assets, as stocks made the best start to the year in a quarter century. The Canadian dollar dropped against the euro on speculation it eight-week advance against the 17-nation currency may be overdone.
“We’re seeing a lot of euro-Canada dollar going through,” Philippe Denolf, a currency trader in Montreal at Laurentian Bank of Canada, wrote in an e-mail. There’s “profit-taking from many types of accounts.”
Canada’s currency, also known as the loonie, was little changed at C$1.0108 per U.S. dollar at 5 p.m. in Toronto after touching C$1.0071, the most since Dec. 8. One Canadian dollar buys 98.93 U.S. cents. It fell 0.8 percent to C$1.3109 versus the euro.
The Standard & Poor’s 500 Index (SPX) added 0.5 percent and the MSCI World Index of equities in developed nations advanced 0.9 percent. Futures for crude oil, the nation’s largest export, fell 0.5 percent to $100.61 a barrel in New York.
Investors should buy the Canadian dollar versus the yen as the loonie “bears down on parity” with the greenback, Sebastien Galy, a senior foreign-exchange strategist at Societe Generale SA in London, wrote in an e-mail today.
Galy predicted the Canadian dollar will strengthen to 82 yen by the end of the first quarter. He recommends exiting the trade if the loonie weakens to 72 yen. The currency rose for a fourth day to 76.27 yen today. It was as low as 72.16 yen in October, the weakest level since February 2009.
Government securities declined today, with the benchmark 10-year yield rising five basis points, or 0.05 percentage point, to 2.01 percent. It ended 2011 at 1.94 percent, after touching 1.837 percent on Dec. 16, the lowest in Bloomberg records dating to June 1989.
Canadian government bonds have lost 0.3 percent this month, according to a Bank of America Merrill Lynch index.
U.S. stocks are off to the best start in 25 years as investors speculate Federal Reserve Chairman Ben S. Bernanke has done enough to insulate the economy from Europe’s debt crisis. The S&P 500 gained 4 percent through Jan. 18, the most since it rose 10 percent over the first 11 days in 1987, according to data compiled by Bloomberg.
“The near-term U.S. dollar-Canada dollar trend appears to be lower still,” Shaun Osborne, chief currency strategist at Toronto-Dominion Bank’s TD Securities unit, wrote in an e-mail message. “As investors rebuild risk positions, the U.S. dollar is likely to slip back.”
Osborne said he’s sticking with his forecast for the Canadian dollar to weaken to C$1.09 by the end of the first quarter.
“It is still a crisis and given what we expect to come down the pike -- more credit problems, a deep recession and more aggressive European Central Bank easing -- we still think the underlying euro trend is lower,” Osborne said.
The loonie gained 1.1 percent during the past month, according to Bloomberg Correlation-Weighted Currency Indexes, a gauge of 10 developed-nation currencies. The U.S. dollar is down 0.9 percent, and the euro fell 1.9 percent.
Ontario will probably sell debt outside Canada to complete a C$35 billion ($34.6 billion) borrowing program before the end of its fiscal year in March, according to the head of the province’s financing arm.
Ontario, Canada’s largest province, has sold C$29 billion this fiscal year, about 80 percent of which has been in Canadian dollars. That share will “probably” fall to 75 percent as the province raises about C$6 billion that remains, said Gadi Mayman, chief executive officer of the Ontario Financing Authority in Toronto.
“There’s a likelihood that we will do something internationally, that we won’t do it all domestically,” Mayman said yesterday in an interview. “It will really depend on market conditions. If opportunities arise internationally, we’re certainly open to it.”
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