The Canadian dollar had its biggest gain in almost four months against its U.S. counterpart as crude oil, the country’s biggest export, rallied on stronger-than- forecast economic data from the U.S. and the U.K.
The currency strengthened versus most of its major peers as a report in the U.S. showed initial claims for unemployment insurance fell more than forecast last week. The U.K. avoided a triple-dip recession with stronger than expected growth in the first quarter and crude oil saw its biggest two-day jump in nine months.
“After five days of gains in risk assets the dam has finally broken in dollar/CAD,” said Adam Button, a currency analyst at forexlive.com, by phone from Montreal. “The pair had been resistant against better news in the stock market and the European bond market for a number of days, but now with the rallies in oil and gold today the Canadian dollar can no longer overlook the obvious good news in risk assets.”
The loonie, as the Canadian dollar is known for the image of the waterfowl on the C$1 coin, rose 0.6 percent against its U.S. counterpart to C$1.0198 per U.S. dollar at 5 p.m. in Toronto. It reached the biggest daily advance since Jan. 2. One loonie buys 98.06 U.S. cents.
The currency strengthened through its 50-day moving average at C$1.0213.
Implied volatility for three-month option on the U.S. dollar versus the Canadian currency reached 6.01, its lowest level in three weeks. Implied volatility, which traders quote and use to set option prices, signals the expected pace of currency swings.
Canada’s 10-year government bonds fell, with yields rising two basis points, or 0.02 percentage point, to 1.74 percent. The 1.5 percent security maturing in June 2023 fell 17 cents to C$97.79.
Futures of crude oil rose 2 percent to $93.28 per barrel in New York, reaching their highest level since April 12, for their biggest two-day jump since Aug. 6. The Standard & Poor’s 500 Index of U.S. stocks gained 0.4 percent.
Applications for U.S. unemployment benefits fell to a six- week low, a sign the labor market is improving after a setback last month.
First-time U.S. jobless claims decreased a larger-than- forecast 16,000 in the week ended April 20 to 339,000, the lowest since March 9, Labor Department data showed in Washington. Also today, Bloomberg’s Consumer Comfort Index held close to the highest level in five years.
“When you have better employment data coming from the U.S. that should be good for Canada,” said Camilla Sutton, head of currency strategy at Bank of Nova Scotia, by phone from Toronto. “But overall, the story is really outside of Canada, it’s just that other currencies are moving faster and so euro moving lower has put a little bit of downside pressure on the other currencies and we’re seeing CAD really as a mid-performer.”
Gross domestic product in Britain rose 0.3 percent in the first quarter, the Office for National Statistics said today in London. The median forecast of 37 economists in a Bloomberg News survey was for 0.1 percent growth. From a year earlier, GDP rose 0.6 percent, the most since the fourth quarter of 2011.
“Following that report there’s definitely a further move to modest strengthening in the dollar,” said Mazen Issa, Canada macro strategist at Toronto-Dominion Bank’s TD Securities unit, by phone from Toronto. “That economy, having had difficulty in registering any economic growth in the past several quarters, so I suppose any modest good news may help to shape the risk sentiment on the day.”
The Canadian dollar has fallen 0.5 percent the past six months against nine developed nation currencies tracked by the Bloomberg Correlation-Weighted Index. The Australian dollar has increased 1.2 percent while the U.S. dollar has gained 2.1 percent.
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