The Canadian dollar fell against the majority of its most-traded peers this week as investors awaited the outcome of the U.S.’s budget standoff and Canadian crude oil prices dropped relative to a U.S. benchmark.
The currency rose versus its U.S. counterpart today as risk appetite improved on optimism that lawmakers in Washington would reach a deal to end its partial government shutdown and avoid a federal-debt default. The U.S. is Canada’s biggest trade partner. The price spread between Western Canada Select oil and West Texas Intermediate increased.
“The overall growth impact of the U.S. government shutdown is a factor” for the Canadian dollar, Camilla Sutton, head of currency strategy at Bank of Nova Scotia (BNS), said by phone from Toronto. “The pricing of oil has moved against the Canadian dollar.”
The loonie, nicknamed for the image of the aquatic bird on the C$1 coin, appreciated 0.4 percent to C$1.0294 per U.S. dollar at 5 p.m. in Toronto. One Canadian dollar buys 97.14 U.S. cents. The currency was little changed on the week against the greenback.
Canada’s government bonds fell for the first time in three days, pushing yields on the benchmark 10-year (GCAN10YR) security up four basis points, or 0.04 percentage point, to 2.58 percent. The price of the 1.5 percent security due in June 2023 dropped 32 cents to C$90.85.
Stocks rose today, with the Standard & Poor’s 500 Index gaining 0.7 percent to 1,690.50.
The U.S. government began its first partial shutdown in 17 years on Oct. 1 as Republicans who control the House insisted on changes to the nation’s 2010 health-care law, President Barack Obama’s signature legislative achievement. The Senate, controlled by Democrats, refused. Congress also faces the statutory debt ceiling, which the Treasury has said will be reached Oct. 17.
“The shutdown is bad for growth in Canada, and as we get closer to the debt-ceiling deadline there is more concern manifesting, which is weighing on the U.S. dollar relative to the loonie,” Shaun Osborne, chief currency strategist at Toronto-Dominion Bank’s TD Securities unit in Toronto, said by phone. “We will probably continue to chop around in a range until this monumental uncertainty is cleared up. It’s all a question of waiting for Washington at this point.”
The discount Canada’s benchmark crude-oil grade, Western Canada Select, faces to West Texas Intermediate oil increased to $34.50 per barrel, the most since January. WTI futures traded at $103.56 a barrel today in New York.
Canada’s purchasing managers increased spending in September by less than economists forecast, according to a gauge released today by Western University’s business school.
The Ivey Purchasing Managers Index rose to 51.9 in September on a seasonally adjusted basis, following an August reading of 51.0, according to a statement on the London, Ontario university’s website. Readings of more than 50 indicate purchasing by governments and companies increased.
Economists projected a reading of 53.6, according to the median of a Bloomberg survey with 10 responses.
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