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Canada Dollar Gains Versus Majors as Oil Rises to 1-Month High

The Canadian dollar gained against the majority of its 16 most-traded peers as crude oil, the nation’s largest export, touched a one-month high after Cyprus agreed with creditors on a bailout.

Canada’s dollar pared gains against its U.S. counterpart after the Dutch finance minister said imposing losses on depositors and bondholders must be part of the bailout toolkit after such measures were taken to avoid default in Cyprus. Canada will report March 28 the economy grew 0.1 percent in January after contracting the month before, according to a Bloomberg survey.

“We’ve had a little bit of a relief rally on the fact we’re not going to get a major implosion on Cyprus today,” said Jeremy Stretch, head of foreign-exchange strategy at Canadian Imperial Bank of Commerce, by phone from London. “After nine- consecutive weeks of shorts being extended, I think there’s potential opportunity, if we do see some slightly firmer numbers -- particularly in terms of the gross domestic product data on Thursday -- for perhaps a little bit of a Canadian dollar recovery.” A short position is a bet an asset’s value will decrease.

The loonie, as the Canadian dollar is known for the image of the aquatic bird on the C$1 coin, rose 0.2 percent to C$1.0213 per U.S. dollar at 5 p.m. in Toronto after climbing as much as 0.4 percent. One loonie buys 97.91 U.S. cents.

Bonds, Oil

Canada’s benchmark 10-year government bonds rose, with yields falling one basis point or 0.01 percentage point to 1.82 percent. The 2.75 percent security maturing in June 2022 rose four cents to trade at C$107.88.

The Bank of Canada will hold an auction of 10-year bonds on March 27.

Crude oil futures gained 1.1 percent to $94.69 per barrel after touching $95.65, highest since Feb. 20. The Standard & Poor’s 500 Index of U.S. stocks fell 0.3 percent after rising as much as 0.5 percent.

The loonie advanced versus the dollar of New Zealand and the krone of Norway, fellow commodity exporting nations, as Western Canada Select, the benchmark for oil-sands bitumen, traded at a discount of $16.50 to U.S. West Texas Intermediate price, the lowest since Oct. 17. The discount has fallen from $42.50 on Dec. 14.

“The problem we’ve got in Canada is that we’re expanding production but we’ve never bothered to figure out to get it to market,” Aaron Fennell, a futures specialist at Bank of Nova Scotia (BNS)’s Scotia McLeod unit, said by phone from Toronto. “That’s slowly working its way through the market -- there’s all sorts of smaller things being done to improve that.”

‘Banking Strength’

The loonie gained for a fourth day against the greenback as Cyprus agreed to wind down its second biggest bank, wiping out bondholders, and tax uninsured deposits over 100,000 euros ($129,000) at its largest bank to stave off bankruptcy and prevent a forced exit from the euro.

It pared the advance after Jeroen Dijsselbloem, the Dutch finance chief who heads the euro-area finance group, told Reuters and the Financial Times that “banks should basically be able to save themselves” before public money is considered.

“A comment like that, and you basically have no reason to keep more than 100,000 euros in any bank,” said Adam Button, a currency analyst at forexlive.com by phone from Montreal. “If you’re an international investor, especially in the developing world, and you need a harbor for your money you’re less likely to look to Europe, and Canada’s well known for its banking strength in the financial crisis. And that’s looking like more of an asset for the Canadian dollar.”

Net Shorts

Future traders increased their bets that the Canadian dollar will decline against the U.S. dollar to the highest level since March 2007, figures from the Washington-based Commodity Futures Trading Commission showed last week.

The difference in the number of wagers by hedge funds and other large speculators on a decline in the Canadian dollar compared with those on a gain -- so-called net shorts -- was 65,331 on March 19, compared with net shorts of 53,397 a week earlier.

The Canadian dollar touched C$1.0342 per U.S. dollar March 1, its weakest point in eight months, and has declined six of the past seven weeks.

Inflation will have increased in February to 0.7 percent from 0.1 percent the month before, below the Bank of Canada’s target band between one percent and three percent, according to the median estimate of a Bloomberg survey of 24 economists.

The Canadian dollar has gained 1.1 percent in the past month against nine other developed-nation currencies tracked by the Bloomberg Correlation Weighted Index. The U.S. dollar has gained 0.6 percent and the euro has lost 1.2 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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