The Canadian dollar fell against most of its most-traded peers as speculation a cease-fire agreement will be reached in the Middle East sent the price of crude oil down from a one-month high.
The currency’s losses were limited after posting its biggest gain in a month against its U.S. counterpart yesterday on optimism the International Monetary Fund is considering classifying the so-called loonie and Australia’s dollar as reserve currencies.
“Any risk-on, the pull back for the dollar versus Canada will not be significant,” said Dean Popplewell, head analyst in Toronto at the online currency-trading firm Oanda Corp. “Canada will only get a greater boost if it moves against the crosses, especially the euro. There are so many unknowns going in to year-end -- in the U.S., and obviously how secure our concerns are with the Middle East.”
The Canadian dollar dropped less than 0.1 percent to 99.68 cents per U.S. dollar at 5 p.m. in Toronto. It touched 99.55 yesterday, the strongest since Nov. 8, as it gained as much as 0.6 percent, the most since Oct. 17. One Canadian dollar buys $1.0032.
Oil, Canada’s largest export, declined 2.2 percent to $87.34 a barrel in New York. The futures contract closed at $89.28 yesterday, the highest settlement since Oct. 19.
Egyptian President Mohamed Mursi said that what he termed as Israeli aggression against Gaza will end today, Egypt’s state-run Middle East News Agency reported. Talks to end the fighting were put on hold as Israel continued to bomb the territory, killing at least 33 Palestinians today and bringing the death toll for the week to 135.
“We’re very much range-bound today after yesterday’s rally,” David Bradley, director of foreign-exchange trading in Toronto at Scotia Capital Inc., a unit of Canada’s third-largest bank, said in a phone interview. “I wouldn’t be surprised by a little Canadian dollar weakness as risk assets wind down before the U.S. Thanksgiving holiday.”
Gains in currencies linked to global growth prospects were also limited as euro-zone finance leaders meeting in Brussels try to fill a 15 billion-euro ($19 billion) hole in Greece’s finances as the sovereign-debt crisis continues for a third year.
The loonie has climbed 1.3 percent this year against nine developed-nation counterparts tracked by Bloomberg Correlation- Weighted Indexes. The euro has declined 2.6 percent, with the U.S. dollar dropping 1.4 percent, and the yen leading decliners with a 7.8 percent drop.
The Canadian dollar may be ready to break its U.S. rival’s “bullish trend momentum that has been in place since September” after the greenback failed to breach strong resistance around C$1.0050, James Chen, chief technical strategist at FX Solutions LLC, said in a note to clients.
If the price stays below C$1.0050, and also breaks below 0.9900, Chen said, it could dive down and re-test 98.00 and even 96.30 cents, a level last seen in August 2011. If the U.S. dollar does break through the C$1.0050 resistance range, it could reach C$1.0230, he said. Resistance is an area on a chart where sell orders may be clustered.
The loonie erased earlier gains after Canadian wholesale sales fell at the fastest pace in 19 months in September, with automobiles and personal goods leading declines across every major category, Statistics Canada said today in Ottawa. Sales dropped 1.4 percent in September to C$48.8 billion ($49 billion). The decline exceeded all 13 forecasts in a Bloomberg economist survey.
Junk bonds are losing their appeal as investors grow more concerned that a U.S. budget showdown will undermine demand in the nation’s commodity-driven economy. The difference in yields on U.S. dollar-denominated Canadian junk bonds and federal government benchmarks reached 575 basis points, or 5.75 percentage points, at the end of last week, the widest since August, according to Bank of America Merrill Lynch index data.
Canadian bonds declined for the second day, pushing the yield on the 10-year benchmark security up two basis points, or 0.02 percentage point, to 1.75 percent. The 2.75 percent note fell 21 cents to C$108.69.
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