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Canada Dollar Rises on Speculation Bernanke May Sustain Stimulus

The Canadian dollar joined most major peers in rising against its U.S. counterpart on speculation Chairman Ben S. Bernanke will signal the Federal Reserve is in no hurry to slow monetary stimulus.

The currency ended two days of losses before Bernanke testifies to Congress tomorrow. The U.S. central bank has been buying $85 billion of assets per month while holding its short-term interest-rate target at almost zero. Bank of Canada Governor Stephen Poloz will keep the benchmark interest rate at 1 percent tomorrow as he releases his inaugural monetary policy report, according to a Bloomberg survey of 20 economists.

“The dollar’s on the back foot against everything because people are just squaring up before Bernanke tomorrow,” said Greg Anderson, head of global foreign-exchange strategy at Bank of Montreal, by phone from Toronto. “The Canadian dollar had not performed nearly as well as other commodity currencies up until 11 a.m. due to technical reasons. And then the technical picture changed.”

The loonie, as the Canadian dollar is known, rose 0.6 percent to C$1.0369 per U.S. dollar at 5 p.m. in Toronto. One loonie buys 96.44 U.S. cents.

Anderson said the loonie strengthening past C$1.0400 per U.S. dollar will mean further gains today.

Bond Market

Canada’s 10-year benchmark government bonds rose, pushing the yield down one basis point, or 0.01 percentage point, to 2.41 percent. The 1.5 percent security maturing in June 2023 added eight cents to C$92.09.

The Bank of Canada will provide additional details on July 18 about a two-year debt sale scheduled for July 24.

Futures on crude oil, Canada’s largest export, dropped 0.5 percent to $105.79 per barrel in New York and the Standard & Poor’s 500 Index of U.S. stocks lost 0.4 percent.

Canadian factory sales rose in May on gains in chemicals and metals while inventories fell from a record high, government figures showed. Sales climbed 0.7 percent to C$48.6 billion ($46.7 billion) in May, leaving them 3.2 percent below their level from 12 months earlier, Statistics Canada said today in Ottawa. Economists forecast a 0.8 percent monthly increase, according to the median of a Bloomberg survey with 15 responses.

Central Bank

The Bank of Canada’s interest-rate announcement tomorrow will retain year-old language crafted by Poloz’s predecessor Mark Carney that indicates the next move in the central bank’s overnight policy rate will be upward, according to all but one of 14 economists surveyed by Bloomberg News.

“The debate there is whether he shifts to a more neutral stance or retains a slight hawkish bias, and I’d say the market is pretty split on that,” said Camilla Sutton, head of currency strategy at Bank of Nova Scotia, by phone from Toronto. “In terms of Canadian data, a slight miss in terms of the estimate for manufacturing sales, but all-in-all better than last month. But if you look at the broader trend it’s still flat overall.”

U.S. industrial production rose in June by the most in four months, signaling manufacturing is improving heading into the second half of the year and boosting bets the economy is getting strong enough for the Fed to wind down economic stimulus this year.

The loonie has gained 1.2 percent in the past three months against nine developed-nation currencies tracked by the Bloomberg Correlation-Weighted Index. The euro led gainers with a 3.5 percent jump followed by the U.S. dollar’s 2.3 percent increase.

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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