Canadian Dollar Rises From 21-Month Low as Oil Surges Above $100

The Canadian dollar rose from almost a 21-month low as crude oil, the country’s largest, surpassed $100 per barrel on dwindling U.S. supplies and concern political turmoil in Egypt will disrupt imports from the Middle East.

The currency strengthened after crude inventories fell by 9.4 million barrels last week, the American Petroleum Institute said yesterday. Egypt’s President Mohamed Mursi rejected an ultimatum by the armed forces to solve the country’s political impasse, fanning concern that unrest may interrupt oil shipments. The U.S. is projected to have added jobs last month while Canada’s payrolls declined, according to separate surveys by Bloomberg before reports July 5.

“The price of oil is up over 100 bucks a barrel,” said David Tulk, chief macro strategist at Toronto-Dominion Bank’s TD Securities unit, by phone from Toronto. “CAD insofar as it’s a commodity play at moments in time, I think that’s probably what’s contributing to the relative out-performance of the Canadian dollar.”

The loonie, as the Canadian dollar is known, added 0.4 percent to C$1.0505 per U.S. dollar at 5 p.m. in Toronto. It fell yesterday to C$1.0578, the weakest level since Oct. 4, 2011. One loonie buys 95.19 U.S. cents.

Bond Market

Futures of crude oil, Canada’s largest export, gained 1.6 percent to $101.21 per barrel in New York, the first time it breached the $100 per barrel mark since September. The Standard & Poor’s 500 Index of U.S. stocks advanced 0.1 percent.

Canada’s benchmark 10-year government bonds fell, with yields up one basis point, or 0.01 percentage point, to 2.42 percent. The 1.5 percent security maturing in June 2023 lost 11 cents to C$91.98. The Bank of Canada will provide further detail tomorrow on a five-year debt sale scheduled for July 10.

Government bonds may lose a key support that helped the debt outperform other sovereign securities since the 2009 recession as economies stabilize worldwide, according to Royal Bank of Canada.

Reserve managers including central banks raised their holdings of Canadian dollar-denominated securities in the first quarter by 5.4 percent to $95 billion from the prior three months, the International Monetary Fund said last week in its debut report on holdings of the Canadian currency. Reserve growth will slow this year and total foreign capital inflows will fall to 2 percent of gross domestic product, from 4 percent, according to estimates from Royal Bank, the nation’s largest lender.

Trade Gap

The currency weakened earlier as Canada extended the longest streak of merchandise trade deficits in a quarter century in May, casting doubt on exporters’ ability to fuel flagging economic growth.

The C$303 million ($287 million) deficit was the 17th in a row and followed an April gap that was revised to C$951 million from C$567 million, Statistics Canada said today in Ottawa. Economists surveyed by Bloomberg forecast the May deficit would be C$700 million. The U.S. is projected to have added jobs last month while Canada’s payrolls declined, according to separate surveys by Bloomberg before reports July 5.

“Neither imports nor exports are actually going gangbusters and when our economy is supposedly shifting from one driven by consumption to one driven by business investment and net exports it’s a couple of reasons to be concerned,” said David Watt, chief economist at the Canadian unit of HSBC Holding Plc. “We don’t seem to be getting a lot of spillover from the U.S. traction in our exports.”

Jobs Data

Canada’s payrolls dropped 7,500 in June, according to a Bloomberg survey. That would compare with a 95,000 increase in May, the nation’s largest one-month employment increase in more more than a decade.

U.S. nonfarm payrolls increased 165,000 in June, while the unemployment rate declined to 7.5 percent from 7.6 percent the previous month, according to a Bloomberg survey of economists.

The loonie has gained 0.2 percent in the past month against nine developed nation currencies tracked by the Bloomberg Correlation-Weighted Index. The U.S. dollar has increased 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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