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Canada Dollar Falls Amid Concern Over U.S. Shutdown Impact, Oil

Canada’s dollar sank as the nation’s crude-oil prices slid relative to a U.S. benchmark and concern increased that the economy will be hurt by the American government shutdown.

The currency touched a two-week low against its U.S. peer as a budget impasse in Canada’s biggest trade partner persisted and another fight loomed over raising the U.S. government’s debt ceiling. The currency erased a weekly loss against the greenback yesterday as risk appetite improved amid optimism that lawmakers in Washington might reach a deal soon. Canadian employment growth slowed in August, a report next week is forecast to show.

“U.S. economic uncertainty equates to Canadian economic uncertainty -- as they sneeze, we get a cold,” Jack Spitz, managing director of foreign exchange at National Bank of Canada in Toronto, said in a phone interview. “There will be a deal, but the uncertainty, combined with less-than-stellar economic releases in Canada, continues to weigh on the Canadian dollar.”

The loonie, as the currency is nicknamed for the image of the aquatic bird on the C$1 coin, fell against 13 of its 16 most-traded peers this week in trading in Toronto.

The currency appreciated 0.1 percent to C$1.0294 per U.S. dollar this week after touching C$1.0356 on Oct. 2, the weakest level since Sept. 16. One Canadian dollar buys 97.14 U.S. cents.

Bonds Fall

Canada’s benchmark 10-year government bond declined for the first time in four weeks, pushing yields on the benchmark security up two basis points, or 0.02 percentage point, to 2.58 percent. The price of the 1.5 percent security due in June 2023 fell 18 cents to C$90.85.

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 $16.7 trillion 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.”

Canada’s dollar touched a four-day high on Sept. 30, C$1.0275, after a report showed gross domestic product increased at the fastest pace in two years in July, with output rising 0.6 percent to an annualized C$1.58 trillion.

Ivey Index

Canadian purchasing managers increased spending in September by less than economists forecast, according to a gauge released yesterday 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. Readings of more than 50 indicate purchasing by governments and companies increased. A Bloomberg survey forecast 53.6.

Employers added 10,000 jobs in September, compared with 59,200 the previous month, economists in another Bloomberg survey projected before Statistics Canada reports the data on Oct. 11.

“We’ve got uncertainty whether or not Canadian exports to the U.S. are going to rebound sharply over the next several months with this uncertainty over the government shutdown and the U.S. economic outlook,” David Watt, chief economist at the Canadian unit of HSBC Holdings Plc, said in a phone interview.

The price spread between Western Canada Select oil and West Texas Intermediate increased yesterday to the widest since January. The discount Canada’s benchmark crude-oil grade faces to WTI oil reached $34.50 a barrel. WTI futures traded at $103.84 in New York.

Oil is Canada’s biggest export.

The Canadian dollar has lost 1.6 percent this year against nine other developed-nation currencies tracked by the Bloomberg Correlation-Weighted Index. The U.S. dollar gained 2.5 percent.

To contact the reporter on this story: Cordell Eddings in New York at ceddings@bloomberg.net

To contact the editor responsible for this story: Dave Liedtka at dliedtka@bloomberg.net

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