Canada Dollar Rises as Crude Oil Climbs Amid Rate Views

The Canadian dollar touched a six- week high against its U.S. counterpart as oil, the nation’s largest export, climbed amid speculation central banks in Europe and China may add monetary stimulus.

The loonie, as the currency is nicknamed, rallied versus most of its 16 major peers as the European Central Bank is forecast to cut interest rates this week. A state-owned newspaper in China said the time is ripe for a reduction in banks’ reserve-requirement ratios, which would indicate monetary stimulus. Stocks rallied, indicating increased demand for riskier assets.

“Commodity currencies have been buoyed by expectations central banks around the globe will offer some stimulus measures to prop up growth after we’ve seen a run of disappointing numbers to begin the week,” said Joe Manimbo, a market analyst in Washington at Western Union Business Solutions, a unit of Western Union Co. (WU)

Canada’s currency gained 0.5 percent C$1.0122 per U.S. dollar at 5:01 p.m. in Toronto, after touching the strongest level since May 17. One Canadian dollar buys 98.79 U.S cents.

Crude oil climbed as much as 5.1 percent to $88.04 a barrel in New York. The Standard & Poor’s 500 Index gained 0.6 percent.

Bonds Decline

Government bonds were little changed with the yield on the nation’s 10-year benchmark bonds trading at 1.74 percent. It reached a record low of 1.615 percent on June 1. The 2.75 percent securities maturing in June 2022 fell five cents to C$109.15.

The Bank of Canada is scheduled to release details Thursday on a five-year note auction on July 11.

Canada’s jobless rate is forecast to stay unchanged from May at 7.3 percent, according to a Bloomberg survey of economists before Statistics Canada agency release data July 6. The country is expected to have added 5,000 jobs in June, compared with a gain of 7,700 the month before.

A U.S. government report this week is projected to show employers added fewer than 100,000 workers for a third month in June. U.S. payrolls added 90,000 workers last month after a 69,000 gain in May, a Bloomberg survey showed before the Labor Department data on July 6.

“It’s a function of how much the numbers come in above or below expectations,” said Shane Enright, as executive director in Toronto at Canadian Imperial Bank of Commerce’s CIBC World Markets unit.. “I would imagine you’d see a little bit of a correction here if the Canadian and U.S. numbers came in on the softer side.”

Risk Demand

Canada’s dollar rose along with other risk-sensitive currencies, tracking the 17-nation euro higher, as European Union PresidentHerman Van Rompuy said leaders meeting in Brussels June 28-29 agreed to drop the condition that emergency loans to Spanish banks give creditor governments preferred status.

“The Canadian dollar benefited from the EU announcement last week when it appeared that some concrete action is going to be taken with respect to the European banks,” said Blake Jespersen, managing director of foreign exchange in Toronto at Bank of Montreal. (BMO) “I think it’s a good start and certainly the market has embraced that initial announcement, but I think there’s a lot more work to be done, so I would not be surprised if there’s some speed bumps along the way.”

ECB officials will lower their main interest rate by a quarter percentage point to a record 0.75 percent on July 5, a Bloomberg News survey of economists shows. EU leaders are looking to the central bank to help stimulate economic growth after they amended bailout rules and moved toward a banking union.

The loonie has gained 1.3 percent this year among 10 developed-nation currencies in Bloomberg Correlation-Weighted Indexes, with the U.S. dollar adding 0.3 percent.

To contact the reporter on this story: Lindsey Rupp in New York at lrupp2@bloomberg.net

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

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