The Canadian dollar fell against the majority of its 16 most-traded peers as signs of an economic slowdown in the U.S., the country’s largest trading partner, damped investor appetite for higher-yielding assets.
The currency advanced earlier to the strongest level in more than a month versus its U.S. counterpart as Canada’s economy grew at a faster-than-forecast pace in January. It trimmed gains as more Americans than projected filed applications for unemployment benefits and business activity in the U.S. expanded at a slower pace than predicted. The so-called loonie rose this week and month amid data showing consumer prices rose at the fastest monthly pace in more than 20 years.
“You’re contrasting some of the slight upside surprise with respect to gross domestic product today -- which gave the Canadian dollar a bit of a lift, at least immediately after the print -- with some of the wider concerns around risk assets more generally,” said David Tulk, chief macro strategist at Toronto- Dominion Bank’s TD Securities unit by phone from Toronto. “This is a case where it seems to balance each other out.”
The loonie, as the Canadian dollar is known for the image of the water fowl on the C$1 coin, was little changed at C$1.0162 per U.S. dollar at 5:00 p.m. in Toronto after reaching C$1.0146, the strongest since Feb. 20. One loonie buys 98.41 U.S. cents.
Canada’s benchmark 10-year government bonds was little changed to yield 1.87 percent. The 2.75 percent security maturing in June 2023 fell 6 cents to C$96.59.
Futures on crude oil, Canada’s biggest export, rose 0.6 percent to $97.19 per barrel in New York, and the Standard & Poor’s 500 Index of U.S. stocks rose to a record high.
Canadian output increased 0.2 percent to an annualized C$1.56 trillion ($1.54 trillion), following a 0.2 percent drop in December, Statistics Canada said in Ottawa. The median forecast in a Bloomberg survey of 25 economists was for a 0.1 percent expansion in the month.
“We got a little uptick in the currency, but now we’re back to where we were before the numbers, so a muted reaction at best,” Matthew Perrier, director of foreign exchange at Bank of Montreal, said by phone from Toronto. “We had a couple upside surprises this week on the Canadian data, so a mild positive for the currency, but it’s only two data points and sort of backward looking ones. We’ll have to see some more data points in the weeks ahead to see if we’re having a real uptick on the Canadian front.”
First-time jobless claims in the U.S. rose by 16,000 to 357,000 in the week ended March 23, the highest level in more than a month, Labor Department data showed in Washington. The median forecast of 48 economists surveyed by Bloomberg called for an increase to 340,000. The four-week average climbed from the lowest level in five years.
The MNI Chicago Report’s business barometer fell to 52.4 this month, the lowest level of the year, from 56.8 in February. A reading greater than 50 signals expansion. The median forecast of 48 economists surveyed by Bloomberg was 56.5.
Traders were the least bearish on the loonie in almost two months as so-called risk reversals show option traders are paying almost the least for protection against loonie weakness since Feb. 4. The three-month 25-delta risk reversal rate fell to 0.92 percentage point from 1.47 percentage points on Feb. 26, its highest since Sept. 4.
The Canadian dollar has gained 1.9 percent this month against nine other developed-nations currencies tracked by Bloomberg Correlation-Weighted Index. The U.S. dollar has climbed 0.3 percent and the euro has lost 1.7 percent.
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