Canadian Currency Weakens as U.S. Government Shutdown Persists
Canada’s dollar fell against the majority of its 16 most-traded counterparts as the U.S. government shutdown persisted, imperiling economic growth in the nation’s biggest trading partner.
The currency reached the weakest level in more than two weeks against its U.S. peer as the first shutdown since 1996 entered its second day amid speculation the standoff would merge with the fight over raising the U.S. debt ceiling later this month. Treasury Secretary Jacob J. Lew said the U.S. has begun using the last measures available to avoid breaching the limit.
There’s “a little bit of weakness in the Canadian dollar,” Blake Jespersen, managing director of foreign exchange at Bank of Montreal, said by phone from Toronto. “There’s a little bit of movement now, but still confined to very narrow ranges. But much of that is related to the U.S. government shutdown.”
The loonie, as the currency is nicknamed for the image of the aquatic bird on the C$1 coin, depreciated 0.2 percent to C$1.0337 per U.S. dollar at 5 p.m. in Toronto. It touched C$1.0356, the weakest level since Sept. 16. One Canadian dollar buys 96.74 U.S. cents.
Canada’s benchmark 10-year government bond rose, pushing the yield down two basis points to 2.54 percent. The price of the 1.5 percent security due in June 2023 rose 13 cents to C$91.13.
The Bank of Canada auctioned C$2.8 billion ($2.7 billion) of 2.5 percent bonds maturing in June 2024 at an average yield of 2.64 percent. It attracted C$6.8 billion in bids. The offering’s bid-to-cover ratio, which gauges demand by comparing total bids with the amount offered, was 2.43.
Options data touched the most bearish level on the Canadian dollar versus its U.S. peer in three weeks. The three-month 25 delta risk-reversal rate, which measures the premium charged for the right to buy the U.S. dollar against its Canadian peer versus contracts to sell, touched 1.4025 percent, the highest intraday level since Sept. 6.
The Canadian dollar lost 1.1 percent in the past month against nine developed-market peers tracked by the Bloomberg Correlation-Weighted Index. The U.S. dollar dropped 3.3 percent, while the Australian currency gained 1.6 percent.
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