Canadian Currency Strengthens Amid Meetings on Second Bailout for Greece

Canada’s dollar gained versus its U.S. counterpart as meetings on an international rescue of Greece stirred optimism Europe may contain its sovereign-debt crisis, increasing investor appetite for risk.

The currency, called the loonie for the image of the aquatic bird on the C$1 coin, fell earlier on concern Greece was struggling to win its second bailout. The loonie erased losses as the euro gained versus most major peers, U.S. stocks rose and crude oil, Canada’s biggest export, climbed on bets an agreement on the package will be reached.

Prospects of an agreement on Greece are “making people fell all warm and fuzzy,” said John Curran, a senior vice president in Toronto at CanadianForex Ltd., an online currency dealer. “People are over-exuberant, which is panning out into a risk-on trade, and that is boosting the Canadian dollar.”

The Canadian currency appreciated 0.2 percent to 99.44 cents per U.S. dollar at 5 p.m. Toronto time, after weakening earlier as much as 0.4 percent. It advanced on Feb. 3 to 99.28 cents, the strongest level since Oct. 31. One Canadian dollar buys $1.0056.

Implied volatility for one-month options on the Canadian dollar versus the greenback fell almost to a nine-month low. It touched 8.06 percent, after reaching 7.87 percent on Feb. 3, the least since April 15. Implied volatility, which traders quote and use to set option prices, signals the expected pace of swings in the underlying currency. The measure has averaged 10.04 over the past year.

Bonds Fall

Canadian government bonds fell, pushing yields on benchmark 10-year notes up six basis points, or 0.06 percentage point, to 2.03 percent. The yields touched 2.06 percent, the highest level since Jan. 25. The price of the 3.25 percent securities due in June 2021 dropped 57 cents to C$110.26.

Greece’s prime minister was to meet today with officials of the European Commission, European Central Bank and International Monetary Fund, known as the troika, to put finishing touches on an accord on budget and structural measures needed to free up a second rescue package, a spokeswoman for his office said.

Papademos’s meeting with leaders of the three political parties that back his government, also scheduled for today, was postponed until tomorrow morning, the spokeswoman said.

German Chancellor Angela Merkel, in a speech in Berlin, restated her determination to keep Greece in the 17-nation euro region. Even so, she said there’s “no way around” Greece carrying out reforms. Full disclosure of its economic situation is required, she said.

The Canadian dollar fell against the euro for a second day, weakening 0.8 percent to C$1.3188.

Crude Oil Climbs

Crude oil for March delivery gained 1.7 percent to $98.73 a barrel in New York. The Standard & Poor’s 500 Index rose 0.2 percent after falling earlier as much as 0.6 percent.

The loonie also erased losses as Canadian building permits rose more than 10 times as much as economists forecast. The value of permits issued in December rose 11.1 percent to C$6.85 billion ($6.85 billion), following a revised 2.6 percent decline in November, Statistics Canada data showed. The gain beat all nine economists’ forecasts in a Bloomberg News survey, whose median forecast was for a 1 percent jump.

“The housing data is meaningful, but it is not the only information that pushes the Canadian dollar around,” said Jack Spitz, managing director of foreign exchange at National Bank of Canada in Toronto.

Canada’s dollar gained 2.2 percent over the past three months against nine developed-nation counterparts monitored by Bloomberg Correlation-Weighted Currency Indexes. The U.S. dollar rose 0.6 percent, while the euro dropped 4 percent.

To contact the reporter on this story: Austen Sherman in New York at asherman18@bloomberg.net

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

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