Canadian Dollar Touches 8-Week High on Federal Reserve

The Canadian dollar touched an almost eight-week high against its U.S. counterpart before a Federal Reserve policy statement forecast to bring a new round of asset purchases to help drive the U.S. economy.

Canada’s dollar gained for a seventh day, the longest streak since January 2011, as the U.S. central bank prepared to release a policy statement at around 12:30 p.m. in Washington, followed by forecasts for growth, unemployment and inflation, and a press conference from Chairman Ben S. Bernanke at 2:15 p.m. The statement is expected to outline $45 billion in monthly Treasury buying as part of the Fed’s quantitative-easing strategy to stimulate job growth, according to a Bloomberg survey of 49 economists. Oil, Canada’s leading export, gained with global stocks.

“The the expectation is they expand QE3 to buying Treasuries,” said Camilla Sutton, head of currency strategy at Bank of Nova Scotia (BNS) by phone from Toronto. “That would weigh on the U.S. dollar over time, so I think generally risk assets are a bit higher.”

The loonie, as the Canadian currency is known for the image of the aquatic bird on the C$1 coin, rose 0.1 percent to 98.55 cents per U.S. dollar at 11:27 a.m. in Toronto today, after touching 98.53, the strongest since Oct. 19. One Canadian dollar buys $1.0147.

Crude-oil futures rose 0.8 percent to $86.47 a barrel in New York. The MSCI World Index of stocks increased 0.3 percent.

Benchmark Canadian 10-year bonds declined, with yields increasing two basis points, or 0.2 percentage point, to 1.75 percent. The 2.74 percent note due in June 2022 fell 20 cents to C$108.69.

Trade Deficits

The trade deficit in the U.S., Canada’s largest trading partner, widened in October, the Commerce Department reported in Washington yesterday, suggesting cooling economies in Europe and Asia may be eroding demand for American goods even as a drop in imports may signal slower domestic growth.

Canada’s trade deficit unexpectedly narrowed in October, with falling imports that suggest domestic spending, which powered the country out of the 2009 recession, may be waning.

Bank of Canada Governor Mark Carney maintained his status as the only central banker with a bias to raise interest rates in a policy statement last week, saying the benchmark could rise as the economy nears full capacity. The bank has kept the benchmark rate at 1 percent since September 2010, the longest pause since the 1950s.

The Fed’s benchmark rate is zero to 0.25 percent and Bernanke has indicated it is likely to stay low until mid-2015.

Canada’s currency has gained 1.1 percent this year versus nine developed-nation peers tracked by Bloomberg Correlation- Weighted Indexes. The greenback has dropped 2.8 percent and the yen has been the biggest loser, tumbling 10.5 percent. New Zealand’s dollar leads gainers, up 6 percent.

To contact the reporter on this story: Ari Altstedter in Toronto at aaltstedter@bloomberg.net

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

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