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Canadian Dollar Gains as U.S. Economic Data Boosts Risk Appetite

The Canadian dollar rose from an almost two-week low against its U.S. counterpart as government data bolstered growth prospects for the world’s largest economy, the nation’s biggest trading partner.

The loonie, as the currency is nicknamed, gained as U.S. housing starts climbed 12.1 percent last month, exceeding all forecasts in a Bloomberg survey of economists, and weekly jobless claims were lower than projected. A report showed foreign purchases of Canadian securities slowed in November, with the fifth straight net acquisition blunted by a decline in demand for bonds.

“The data out of North America is somewhat stronger, which is helping the loonie,” Dean Popplewell, head analyst in Toronto at the online currency-trading firm Oanda Corp., said by phone from Toronto. “Now that the euro has eased, and North America is stronger, the Canadian dollar has found some traction.”

The Canadian dollar was little changed at 98.58 cents per U.S. dollar at 5:03 p.m. in Toronto. It earlier touched the weakest level since Jan. 7. One loonie buys $1.0144.

Futures on crude oil, the nation’s largest export, rose 1 percent to $95.20 a barrel in New York. The Standard & Poor’s 500 Index added 0.6 percent.

China Watch

The loonie declined earlier today with so-called commodity currencies, including the Australian dollar, as traders await figures that may show gross domestic product in China expanded 7.8 percent in the fourth quarter from a year earlier, according to the median estimate of economists surveyed by Bloomberg News. China is the world’s biggest energy consumer.

“The upcoming risk is China’s GDP that we will get in tonight’s market,” Camilla Sutton, head of currency strategy at Bank of Nova Scotia (BNS), said by phone from Toronto. “The market is looking for improvement over Q3. As long as that does occur, then it’s likely positive for currencies like Canada or Australia.”

Benchmark 10-year Canadian government bonds fell, with the yield rising six basis points, or 0.06 percentage point, to 1.95 percent. The price of the 2.75 percent note maturing in June 2022 declined 53 cents to C$106.82.

Foreign purchases of Canadian securities totaled C$5.62 billion ($5.7 billion) in November following October’s revised buying of C$12.7 billion, Statistics Canada said today in Ottawa. Canadians more than doubled their net buying of international securities in November to C$7.81 billion from C$3.36 billion, led by C$6.23 billion of foreign bonds.

Money Flows

The loonie may lose “medium-term support” as a result of Canadians increasing their international holdings more than foreign investors increased their Canadian holdings, Citigroup Inc. (C) in a note to its clients.

Prime Minister Stephen Harper’s government will examine a broad pool of candidates to replace Mark Carney as Bank of Canada Governor, and won’t let a tight time frame deter it from looking beyond internal candidates such as Senior Deputy Governor Tiff Macklem, according to a person with knowledge of the process.

The central bank has kept its policy interest rate at 1 percent since September 2010, the longest pause since the 1950s, and has said since April that borrowing costs may rise.

Trading in overnight index swaps show a 17.2 percent chance of the Bank of Canada raising interest rates at its May 29 meeting, according to data compiled by Bloomberg.

The loonie has fallen 1.3 percent during the past six months versus nine developed-nation peers tracked by Bloomberg Correlation-Weighted Indexes. The euro has gained 5.5 percent while the greenback has dropped 4 percent.

To contact the reporters on this story: Taylor Tepper in New York at ttepper2@bloomberg.net; 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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