Canadian Currency Declines to Parity After Reaching Highest Level in Week
The Canadian dollar fell for the first day this week versus its U.S. counterpart as bets that an aid package for Greece may be delayed until after it holds elections this year damped appetite for riskier assets.
The currency, nicknamed the loonie for the image of the bird on the C$1 coin, rose earlier the most in almost two weeks as crude oil, Canada’s biggest export, climbed. The loonie weakened after Greek Finance Minister Evangelos Venizelos said Europe’s wealthier countries are toying with the idea of expelling his nation from the 17-nation euro area.
“The Canadian dollar is reacting to all of the headlines out of Europe,” said Charles St-Arnaud, a foreign-exchange strategist at Nomura Holdings Inc. in New York. “There is still a lot of uncertainty out of Europe. Unless we get a clearer sign the bailout will be approved, it will be hard for sentiment to be positive.”
Canada’s dollar depreciated 0.1 percent to parity with the greenback, C$1 per U.S dollar, at 5 p.m. in Toronto. It advanced earlier as much as 0.5 percent to 99.38 cents, the strongest level since Feb. 9.
The Standard & Poor’s 500 Index dropped 0.5 percent after rising as much as 0.4 percent. The loonie has a 60-day correlation coefficient of 0.83 with the equity gauge. A reading of 1 would indicate they move in lockstep.
Crude oil touched $102.54 a barrel in New York, the highest level since Jan. 12, before trading at $101.88, up 0.9 percent.
Bonds Gain
Canadian government bonds rose for a second day, pushing the yield on the benchmark 10-year note down one basis point, or 0.01 percentage point, to 2.1 percent. It touched 1.99 percent, the lowest level since Feb. 7. The 3.25 percent securities due in June 2021 increased 7 cents to C$110.45.
The government auctioned C$3.5 billion ($3.5 billion) of five-year notes today at an average yield of 1.424 percent, according to a statement on a Bank of Canada website. That was down from 1.441 percent at the last offering of the securities in November.
The sale attracted $8.5 billion in bids. The bid-to-cover ratio, which gauges demand by comparing the amount bid with the amount offered, was 2.43, versus an average of 2.39 at the past five auctions. The 1.5 percent securities are due in March 2017.
Yields on current five-year note declined one basis point to 1.37 percent.
‘Playing with Fire’
The Canadian currency erased gains against the U.S. dollar and the euro fell versus most major peers on speculation a bailout package for Greece, where Europe’s debt crisis began more than two years ago, could be delayed until after the nation holds elections. Greece’s second-biggest political party, New Democracy, wants voters to go to the polls in April.
Greek Finance Minister Venizelos said wealthier euro-area nations were “playing with fire” after a decision scheduled for today on aid was put off until at least Feb. 20. The rescue totals 130 billion euros ($171 billion). Luxembourg’s Jean- Claude Juncker, who leads euro-area finance chiefs, said after a conference call he’s confident the needed decisions will be made Feb. 20. He said Greece made “substantial further progress.”
Greece faces a bond redemption on March 20, when the government must come up with 14.5 billion euros or become the first country in the euro’s 13-year history to default.
“Reality will set in when Greece actually has to pay down their bond issues and implement the austerity measures,” said John Curran, a senior vice president in Toronto at CanadianForex Ltd., an online foreign-exchange dealer. “Stay tuned.”
Euro Slides
Canada’s dollar advanced as much as 0.8 percent to C$1.3021 per euro, the strongest level since Feb. 6, before trading at C$1.3066, up 0.4 percent.
The Canadian currency fell from its high for the day against the greenback even after production at factories in the U.S., its biggest trade partner, increased in January.
Output at factories rose 0.7 percent after a revised 1.5 percent gain in December that was the largest in five years, figures from the Federal Reserve showed. A 2.5 percent decline in utility output prompted by the fourth-warmest January on record caused total industrial output to be little changed.
A gauge of manufacturing in the New York region climbed this month at the fastest pace since June 2010. The Federal Reserve Bank of New York’s general economic index increased to 19.5, from 13.5 in January.
The loonie remained higher than nine of its 16 most-traded counterparts tracked by Bloomberg.
“People are choosing to express their favor for the Canadian dollar much more against other currencies then against the U.S. dollar,” Curran said.
The loonie gained 1.6 percent over the past three months against nine developed-nation counterparts monitored by Bloomberg Correlation-Weighted Currency Indexes. The U.S. dollar fell 1.1 percent, and the euro tumbled 4.4 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
Rate this Page