Canada’s currency declined against the majority of its 16 most-traded peers as crude oil tumbled for a third day amid skepticism global central banks can boost economic growth through monetary-stimulus measures.
The currency fell after the U.S. said crude-oil stockpiles rose 8.53 million barrels last week to 367.6 million, compared with a gain of 1 million barrels forecast by analysts in a Bloomberg survey, sending crude down as much as 4.2 percent. The Canadian dollar fluctuated against its U.S. peer after Japan’s announcement of further stimulus, following similar moves by the Federal Reserve and ECB, suggesting the currency has peaked after touching a 13-month high last week.
“There’s a risk-off tone today with uncertainty with Europe, and since the Canadian dollar is a risk asset, it will be impacted by that,” Eimear Daly, a currency market analyst at Monex Europe Ltd. in London, said in a phone interview. “After the announcement of further quantitative easing in the U.S. last week, we had this massive sell-off of the Canadian dollar and the market overextended itself -- now we’re seeing a sharp pullback.”
The currency touched 96.33 on Sept. 14, the strongest since August 2011, after the Fed announced further bond purchases to stimulate the economy of Canada’s largest trading partner.
Crude-oil futures fell 3.7 percent to $91.76 a barrel in New York after declines of 1.4 percent and 2.4 percent the previous two days.
Canadian government bonds advanced for a third day, the longest streak in three weeks, with the yield on the 10-year benchmark falling three basis points, or 0.03 percentage point, to 1.89 percent. The 2.75 security added 27 cents to C$107.64.
The Bank of Canada auctioned C$1.4 billion ($1.4 billion) of 30-year bonds yielding 2.47 percent. The bank received C$3.7 billion in bids for the 3.5 percent notes with a bid-to-cover ratio of 2.6. Two previous sales of the same amount of the securities this year yielded 2.41 percent in May and 2.79 percent in March. The yield on current 30-year bonds fell three basis points to 2.46 percent.
The Bank of Japan (8301) unexpectedly expanded its asset-purchase fund by 10 trillion yen (C$124 billion) as it sought to counter increasing danger of contraction in the world’s third-largest economy. The decision to ease policy was forecast by five of 21 analysts surveyed by Bloomberg News.
The yen advanced against most major currencies, including the loonie.
The U.S and Canadian dollars may be forming an inverse head-and-shoulders pattern, they wrote, which could see Canada’s currency weaken past the 97.60-to-97.70 level to 98.90 or parity, which it last touched on Aug. 3.
“We’re seeing a marginal unwind of the Canadian dollar strength that had been put on following the Fed” and ECB stimulus measures, Matthew Perrier, Toronto-based director of foreign exchange at Bank of Montreal (BMO), said in a phone interview. “There are still some real issues in Europe.”
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