Canadian Currency Fluctuates Amid Fed Tapering Speculation
Canada’s dollar fluctuated amid speculation the nation’s economic expansion is faltering and bets the U.S. Federal Reserve will soon cut monetary stimulus that has fueled demand for riskier assets worldwide.
The Canadian currency lost ground to its U.S. counterpart as data showing a return in U.S. manufacturing provided more justification for policy makers to wean the economy off four years of monetary stimulus. Bank of Canada policy makers will leave the benchmark overnight rate at 1 percent tomorrow, according to trading in overnight index swaps, which also show investors are pricing in 10 basis points of tightening for the bank’s June 2014 meeting, down from 16 points a month ago.
“The ISM continued to pressure the loonie with the U.S. dollar rallying on positive data and the growing prospect of a Fed September taper,” said Adrian Miller, director of fixed-income strategies at GMP Securities LLC in New York.
The loonie, as the Canadian dollar is nicknamed for the image of a waterfowl on the C$1 coin, traded little changed at C$1.0541 per U.S. dollar at 11:47 a.m. in Toronto, after rising to as high as C$1.0509. One loonie purchases 94.87 U.S. cents.
Accelerating U.S. growth has prompted Fed Chairman Ben S. Bernanke to pledge to slow monetary stimulus if the economic expansion meets policy makers’ forecasts.
The Institute for Supply Management’s manufacturing index increased to 55.7 in August from 55.4 a month earlier, the Tempe, Arizona-based group said today. The median forecast of 85 economists surveyed by Bloomberg called for a reading of 54.
Bets by futures traders the Canadian dollar will weaken versus its U.S. peer outnumbered those it will gain by the most in 10 weeks, data from the Washington-based Commodity Futures Trading Commission show last week. The difference in the number of wagers by hedge funds and other large speculators on a decline in the Canadian dollar compared with those on a gain -- so-called net shorts -- was 24,959 in the week ended Aug. 27, the most since June 21.
The nation’s gross domestic product expanded 1.7 percent at an annual rate from April through June, slowing from a 2.2 percent pace in the first quarter, Statistics Canada reported last week. U.S. GDP rose at a 2.5 percent annualized rate in the second quarter, up from the initial estimate of 1.7 percent, Commerce Department figures showed Aug. 29.
To contact the reporter on this story: Cecile Gutscher in Toronto at firstname.lastname@example.org
To contact the editor responsible for this story: Dave Liedtka at email@example.com