Canadian Dollar Weakens on Speculation of U.S. Economic Slowing

The Canadian dollar fell against the majority of its most-traded peers as a report in the U.S., Canada’s biggest trading partner, showed durable-goods orders declined more than forecast last month.

The currency weakened earlier today against the greenback as the U.S. Commerce Department reported bookings for goods meant to last at least three years fell 5.7 percent in March, exceeding the median forecast for a 3 percent drop, according to a Bloomberg survey of 78 economists. It traded at an almost six- week low yesterday on signs from Europe and China that global economic growth is slowing, undermining demand for Canada’s exports.

“What we’re seeing is doubts about the sustainability of global growth come to the forefront,” said David Doyle, a strategist at Macquarie Capital Markets by phone from Toronto. “Doubts about the sustainability of U.S. growth could raise potential for Canada to suffer more of a downturn than we already are.”

The loonie, as the Canadian dollar is known for the image of the aquatic bird on the C$1 coin, was little changed at C$1.0256 per U.S. dollar at 5:01 p.m. in Toronto, after falling as much as 0.2 percent. The currency reached C$1.0294 on April 17, the weakest level since March 13. One loonie buys 97.50 U.S. cents.

Options Data

The cost to insure against declines in the Canadian dollar versus its U.S. counterpart was at almost its highest in six weeks. The three-month so-called 25-delta risk reversal rate was 1.725 percent, after reaching 1.775 percent yesterday, its highest since March 11. Risk reversals measure the premium on options contracts to sell Canadian dollars versus buying U.S. contracts that do the opposite.

The Canadian dollar has traded between C$1.0286 and C$1.0233 the past five days.

“The Canadian dollar has held up well relative to U.S. dollar strength, the range has been very confined,” said Darcy Browne, managing director of currencies at Canadian Imperial Bank of Commerce’s CIBC World Markets unit, by phone from Toronto. “There’s continual interest on both sides of the market related to options, so that’s why we’re hemmed in these tiny little ranges at the moment.”

Bonds Gain

Canada’s 10-year government bond yields were littler changed at 1.72 percent. The 1.5 percent securities maturing in June 2023 added 2 cents to C$97.96.

The Bank of Canada sold C$3.3 billion ($3.2 billion) of 1.5 percent notes maturing in August 2015 at a yield of 0.99 percent.

Crude oil, Canada’s largest export, rose 2.8 percent to $91.65 per barrel in New York, while the Standard & Poor’s 500 Index of U.S. stocks was little changed.

Investors are pulling money out of Canadian fixed-income mutual funds at the fastest pace in more than four years as evidence mounts economic growth in the U.S. is leaving its largest trading partner behind.

Individuals withdrew C$981.4 million ($956 million) from fixed-income funds in March and February, the biggest two-month outflow since December 2008, even as they poured money into international and high-yield bond funds, according to data from the Investment Funds Institute of Canada.

U.S. orders for U.S. durable goods fell by the most in seven months as demand slumped for commercial aircraft and business investment cooled.

“When you go back and look over the past three years or so, this pattern of data disappointment has been quite common,” said Shaun Osborne, chief currency strategist at Toronto- Dominion Bank, by phone from Toronto. “The spring swoon or soft patch, whatever you want to call it, has been very much a feature of U.S. economic data, and that feature spills over into risk assets.”

The Canadian dollar has risen 0.9 percent in the past three months against nine developed-nation currencies tracked by the Bloomberg Correlation Weighted Index. The U.S. dollar has gained 3.2 percent while the Australian dollar added 1.6 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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