Canada Dollar Touches Weakest Since August Before Policy Meeting

The Canadian dollar touched the lowest level against its U.S. counterpart in more than 10 weeks amid speculation the Bank of Canada will put less emphasis at a policy meeting tomorrow on raising interest rates.

The loonie, as the currency is nicknamed for the image of an aquatic bird on the C$1 coin, fell versus a majority of its most-traded peers. Central-bank Governor Mark Carney suggested in an Oct. 15 speech that tomorrow’s economic forecast will reflect a slow global recovery. Canada rejected on Oct. 19 a C$5.2 billion ($5.23 billion) bid by Petroliam Nasional Bhd. for Calgary-based Progress Energy Resources Corp. (PRQ)

“The statement may focus a little bit more on uncertainty from slower growth abroad,” Sireen Harajli, a foreign-exchange strategist in New York at Credit Agricole Corporate & Investment Bank, said in a telephone interview. “Even though it may face some short-term weakness, longer term we expect the Canadian dollar to strengthen given its relatively better growth rates and proximity to the U.S.”

Canada’s currency gained 0.1 percent to 99.22 cents per U.S. dollar at 5 p.m. in Toronto. The loonie touched 99.65 cents earlier, its weakest level since Aug. 10. One Canadian dollar buys $1.0077.

The loonie weakened as oil, the nation’s biggest export, fell. Crude-oil futures tumbled as much as 2.1 percent to $88.20 per barrel in New York, the lowest level in more than two weeks.

Canadian government bonds declined, pushing the yield on the 10-year benchmark note up three basis points, or 0.03 percentage point, to 1.87 percent. The price of the 2.75 percent securities maturing in June 2022 fell 26 cents to C$107.72.

Policy Meeting

Carney has kept his key interest rate at 1 percent for more than two years and will probably leave it unchanged again at tomorrow’s policy meeting, according to a survey of Bloomberg economists.

The BOC chief’s speech a week ago omitted language he’s used since April (APR) that raising interest rates “may become appropriate” as Canada’s economy approaches full output. The omission spurred speculation the central bank will remove the phrase from its interest-rate announcement, which is scheduled for 9 a.m. tomorrow in Ottawa. The benchmark rate won’t be changed tomorrow, economists in a Bloomberg survey forecast.

“There’s an outlook of some softening in the bank’s tone,” Shaun Osborne, chief currency strategist at Toronto- Dominion Bank, said in a telephone interview. “Comments from Carney last week indicate that they will be shifting toward a less hawkish bias.”

Technical Moves

The loonie is overbought and may depreciate to $1.0040 to $1.0136 as part of a corrective phase, Niall O’Connor, a New York-based technical analyst at JPMorgan Chase & Co. in New York, wrote today in a note to clients. If the currency moves below the 98.80 area, it could appreciate to 97.33 cents, its strongest level in a month, he wrote.

Futures traders decreased their bets the Canadian dollar will gain against the U.S. dollar, figures from the Washington- based Commodity Futures Trading Commission show. The difference in the number of wagers by hedge funds and other large speculators on an advance in the Canadian dollar compared with those on a drop -- so-called net longs -- was 93,750 on Oct. 16, compared with net longs of 95,628 a week earlier.

The loonie will trade at 98 cents per U.S. dollar by the end of the year, according to a Bloomberg survey.

To contact the reporter on this story: Joseph Ciolli in New York at jciolli@bloomberg.net

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

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