Canada’s Dollar Weakens Second Day on Stalled U.S. Budget Talks

The Canadian dollar declined against its U.S. peer for a second day as U.S. negotiations over the so- called fiscal cliff of tax increases and spending cuts set to start in January remain unresolved.

Canada’s currency traded in the tightest range against the greenback since July 4 as U.S. House Speaker John Boehner offered a backup plan as he seeks compromise between fellow Republicans and the government. The Canadian dollar declined against the euro as German business confidence increased for a second month in December, signaling Europe’s largest economy may support a euro-area recovery next year.

“The Canadian dollar appears to be the currency of choice for those looking to hedge fiscal-cliff risk,” Camilla Sutton, head of currency strategy at Bank of Nova Scotia (BNS), said by phone from Toronto. “If business confidence is improving, that’s likely positive for the German economy and that’s also helped support the euro.”

The loonie, as the Canadian currency is known for the image of the aquatic bird on the C$1 coin, declined 0.1 percent to 98.67 cents at 8:32 a.m. in Toronto. One Canadian dollar buys $1.0125.

Canada’s dollar fell 0.7 percent against the euro to 1.3111, its second daily decline.

The House may vote tomorrow on Boehner’s “Plan B,” which would raise tax rates on income over $1 million, rather than the $400,000 threshold the president proposed in his latest offer. The Obama administration and Democrats rejected the Boehner plan, released yesterday, as inadequate. The U.S. is Canada’s biggest trade partner.

To contact the reporter on this story: John Detrixhe in New York at jdetrixhe1@bloomberg.net

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

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