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Canadian Currency Climbs Most in a Month as China Data Fuel Bets

Canada’s dollar gained the most in a month as stronger-than-forecast Chinese economic data added to signs global growth is accelerating, stoking speculation that demand will increase for the nation’s raw materials.

The loonie, as the currency is nicknamed for the image of the aquatic bird on the C$1 coin, briefly pared its weekly advance yesterday as Canada unexpectedly lost jobs and the unemployment rate rose. China will become the world’s biggest net importer of oil, the largest Canadian export, by October, the U.S. Energy Information Administration said yesterday.

“The real driver of global themes this week was just stronger Chinese data,” David Tulk, chief macro strategist at Toronto-Dominion Bank’s TD Securities unit, said by telephone from Toronto. “This does help to perk up Canadian growth expectations, and with them the Canadian dollar.”

Canada’s currency appreciated 1 percent to C$1.0289 per U.S. dollar this week in Toronto, the biggest jump since the five days ended July 12. One Canadian dollar purchases 97.19 U.S. cents.

Benchmark 10-year government bonds gained for the first time in three weeks, with yields slipping one basis point, or 0.01 percentage point, to 2.48 percent. The yields touched 2.60 percent on Aug. 2, a two-year high. The price of the 1.5 percent securities maturing in June 2023 added 8 cents to C$91.54.

Bond Auction

The Bank of Canada 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.

The central bank sold C$2.7 billion of three-year bonds Aug. 7 at a 1.373 percent average yield. The 1 percent securities due in August 2016 drew C$7.1 billion in bids for a bid-to-cover ratio of 2.64. The average ratio at the past five sales of the debt was 2.76.

The currencies of Australia and New Zealand, which like Canada export commodities, climbed this week on China’s economic data. The U.S. dollar fell versus all of its 16 most-traded counterparts as demand for safety faded.

In a basket of 10 developed nation currencies tracked by Bloomberg Correlation-Weighted Indexes, the loonie slipped 0.3 percent on the week. The Aussie dollar strengthened 2.2 percent, and New Zealand’s dollar gained 1.3 percent, while the greenback dropped 1.5 percent.

Bets Decreased

Hedge funds and other large speculators decreased for a fourth straight week their bets that the Canadian dollar will decline against the greenback, figures from the Washington-based Commodity Futures Trading Commission show. The difference in the number of wagers on a decline in the loonie compared with those on a gain -- so-called net shorts -- was 10,436 on Aug. 6, the narrowest since February.

Canada’s currency jumped as much as 1.1 percent on Aug. 8, the most since June 29, 2012, when compared with closing prices, after the government statistics agency in Beijing reported China’s exports rose 5.1 percent in July from a year earlier, while imports gained 10.9 percent.

Chinese factory production increased 9.7 percent in July from a year earlier, data from the country showed yesterday. Analysts in a Bloomberg survey had forecast an 8.9 percent gain.

Retail sales in the world’s second-biggest economy advanced 13.2 percent, while fixed-asset investment excluding rural households grew 20.1 percent in the first seven months of the year, other reports showed.

‘Risk Currency’

“The Canadian dollar is a risk currency, and what we’ve seen lately coming out of China, and this week was a very heavy China-data week, was much better than expected,” Eimear Daly, a currency-market analyst at Monex Europe Ltd., said by phone from London. “The Canadian dollar as a commodity currency is obviously going to gain in line with that.”

China’s oil imports will reach 6.45 million barrels a day by October, surpassing the America’s 6.23 million barrels, the U.S. energy-information agency forecast in a short-term energy outlook. It cited “steady growth in Chinese demand” and increased American production.

Crude climbed yesterday, paring a weekly loss. Futures ended the week down 0.6 percent to $105.97 a barrel in New York.

Oil slid for the previous five days amid concern the Federal Reserve will curb monetary stimulus to Canada’s biggest trade partner as soon as next month. 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 purchases of $85 billion in bonds to put downward pressure on borrowing costs and spur growth.

Employment Drops

The loonie fell briefly yesterday after Statistics Canada reported the nation lost 39,400 jobs in July and the unemployment rate rose to 7.2 percent, from 7.1 percent. Economists in a Bloomberg survey forecast a 10,000-job gain and an unchanged jobless rate.

Even after the losses, Canada has had a monthly average of an additional 18,400 jobs over the past three months, thanks to the 95,000 positions that were added in May, the most in a decade. The average in the second half of 2012 was 27,820.

“We are still seeing some adjustment from that extraordinarily strong figure in May, so taken as the average over the last three months it doesn’t look quite as bad as the headline suggests,” said Adam Cole, head of Group of 10 currency strategy at Royal Bank of Canada, by phone from London. “It’s a soft reading, no doubt, but it’s not catastrophic, and the trend is still moderately higher.”

The jobs number will likely not affect Bank of Canada policy, Cole said. The central bank said in a July 17 statement its next policy move will be to raise interest rates, which policy makers have held at 1 percent since 2010 to support the economy. The bank boosted 2013 growth estimates to 1.8 percent, up from a prediction in April of 1.5 percent.

To contact the reporter on this story: Ari Altstedter in Toronto at aaltstedter@bloomberg.net

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

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