Canadian Dollar Gains Most in Month on Global Economic Optimism

Canada’s dollar strengthened the most in almost a month after improved trade data from China and Germany added to signs the global economy is recovering, fueling speculation demand for the nation’s commodities will increase.

The currency advanced for the first time in three days as reports showed Chinese exports climbed more than forecast and German (GRBTEXMM) exports rose. It extended gains after initial jobless-benefits claims in the U.S., Canada’s biggest trade partner, fell over the past month to the lowest in more than five years. Metals rallied.

“The Canadian dollar has been the laggard for the last week or so,” said Adam Button, a currency analyst in Montreal at forexlive.com. “With the Chinese (CNFREXPY) data overnight and a stronger outlook for commodities, the Canadian dollar is better positioned.”

Canada’s currency, nicknamed the loonie for the image of the bird on the C$1 coin, appreciated 0.9 percent, the most on a closing basis since July 11, to C$1.0328 per U.S. dollar at 5 p.m. in Toronto. It gained as much as 1.1 percent to C$1.0304, the strongest level since Aug. 1, after sliding yesterday to C$1.0445, the weakest since July 11. One Canadian dollar purchases 96.82 U.S. cents.

The currency declined 2 percent over the past three months against nine developed-nation peers tracked by the Bloomberg Correlation-Weighted Index. The Australian dollar fell the most, losing 10 percent, while the U.S. dollar advanced 0.9 percent.

Benchmark 10-year Canadian-government bonds were little changed after rising earlier and pushing yields down as much as three basis points, or 0.03 percentage point, to 2.47 percent. The yields ended the day at 2.5 percent as the price of the 1.5 percent securities due in June 2023 added 4 cents to C$91.39.

Bond Auction

The Bank of Canada said it will auction C$2.8 billion ($2.7 billion) of 10-year bonds on Aug. 14. The 2.5 percent securities mature in June 2024.

Chinese shipments overseas climbed 5.1 percent in July from a year earlier after sliding 3.1 percent in June, according to the General Administration of Customs in Beijing. A Bloomberg survey forecast a 2 percent increase. German exports increased 0.6 percent in June from May, when they dropped a revised 2 percent that was less than originally estimated, the Federal Statistics Office in Wiesbaden said.

Positive Tone

“It’s generally a positive data tone, especially out of China, where we were concerned about maybe a little bit of a harder landing,” said David Tulk, chief macro strategist at Toronto-Dominion Bank’s TD Securities unit in Toronto. “The sense that the rest of the world is doing OK does help support Canada, given the fact that we have become increasingly reliant on net exports to drive the next stage of the recovery.”

Copper climbed as much as 3.4 percent to $3.2795 a pound, the highest level since June 11, on Comex in New York. Copper, nickel and zinc gained on the London Metal Exchange.

Oil, Canada’s biggest export, slid as the decline in U.S. jobless claims raised concern the Federal Reserve will trim stimulus measures. Crude futures dropped as much as 2.1 percent to $102.22 a barrel in New York, the lowest in a month, before trading at $103.86, down 0.5 percent.

U.S. policy makers are discussing whether the world’s biggest economy has improved enough for them to start slowing the pace of their monthly bond purchases. The Fed buys $85 billion of Treasuries and mortgage debt each month to put downward pressure on borrowing costs and spur growth.

Applications for unemployment benefits in the U.S. in the four weeks ended Aug. 3 declined to 335,500 on average, the least since November 2007, Labor Department data showed today.

‘Less Rabid’

“Initial jobless claims helped to further the strengthening,” TD’s Tulk said of the Canadian currency. “Some of the tapering concern where we would see stronger U.S. data as being negative for the Canada dollar has faded a little bit. The market is a little less rabid in trying to price in tapering expectations.”

Canada’s payrolls grew by 10,000 jobs last month after losing 400 positions in June, economics surveyed by Bloomberg forecast before data due tomorrow. The workforce surged in May by 95,000, the most in a decade. The unemployment rate held at 7.1 percent in July for a third month, economists estimated.

New housing prices in Canada rose 0.2 percent in June after increasing 0.1 percent the month before, Statistics Canada data showed today. A Bloomberg survey forecast a 0.1 percent gain.

“It’s a 0.1 percent beat -- I wouldn’t exactly look at it as an outlier result,” said Jack Spitz, managing director of foreign exchange at National Bank of Canada (NA) in Toronto. “But it wasn’t negative. The breakup price action likely comes on the back of the employment data tomorrow in Canada.”

To contact the reporter on this story: Jeff Marshall in New York at jmarshall75@bloomberg.net

To contact the editor responsible for this story: Robert Burgess at bburgess@bloomberg.net

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