Canada’s dollar advanced against the majority of its 16 most-traded counterparts after the economy of the U.S., its largest trading partner, grew more than originally forecast in the second quarter.
The Canadian currency traded at almost a four-month high against the U.S. currency as riskier assets advanced after German Chancellor Angela Merkel said she’s convinced that Italy’s “reforms” will help reduce the interest rates that the nation pays for its bonds. Canada’s dollar was also supported as the Federal Reserve said the U.S. economy continued to expand “gradually” in July.
The growth in U.S. gross domestic product “reinforces the view that Canada is likely to be the main beneficiary,” said Sebastien Galy, a senior foreign-exchange strategist at Societe Generale SA in New York. “The foreign-exchange market is running ahead and buying the solid platinum loonie.”
Canada’s currency fell 0.1 percent to 98.94 cents per U.S. dollar at 5 p.m. in Toronto. Earlier it gained as much as 0.2 percent after touching 98.43 cents yesterday, equal to the strongest since May 3. One Canadian dollar buys $1.01071.
Gains in the currency were limited as crude-oil futures fell. Oil decreased 1.2 percent to $95.18 per barrel in New York, as Hurricane Isaac made landfall in the U.S. and Group of Seven nations said prices may threaten the global economic recovery.
The Bank of Canada auctioned C$2.9 billion of three-year bonds at a 1.278 percent average yield with a bid-to-cover ratio of 2.73. The previous auction of similar-maturity bonds on June 13 drew an average yield of 1.153 percent and a coverage ratio of 2.47 times, compared with an average over the past five three-year auctions of 2.46 times.
Yields on Canada’s two-year benchmark bond fell two basis points, or 0.02 percentage point, to 1.14 percent. The 2.25 percent security rose 3 cent to C$102.09.
The Fed said in its Beige Book business survey based on reports from its 12 districts that improvement in housing and retail sales helped outweigh weakness in manufacturing.
U.S. GDP climbed at a 1.7 percent annual rate from April through June, up from an initial estimate of 1.5 percent, revised Commerce Department figures showed in Washington, reflecting an improvement in the trade deficit and a pickup in household spending on utilities. The revised data showed companies invested in new equipment at the slowest pace in almost three years.
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