Canada Dollar Weakens as Crude Oil Near Lowest Since June

Canada’s dollar fell versus most major peers as crude oil, the nation’s biggest export, traded at almost a four-month low and a discount on western Canadian oil increased to the steepest level since January.

The currency weakened from the strongest in more than a week against the U.S. dollar as oil from the Alberta province dropped more than competing grades on concern production will be stymied by bottlenecked pipelines. A gauge of consumer confidence rose earlier for the first time since September as opinions about house prices and job security improved.

“We could see more downside from here for commodities; obviously it’s not positive for the Canadian dollar,” Greg T. Moore, a currency strategist at Toronto-Dominion Bank, said by phone from Toronto. “Oil is now below a pivotal $95 a barrel, and on top of that you have the spread for Western Canada Select near its record wide.”

The loonie, as the Canadian dollar is known for the image of the waterfowl on the C$1 coin, declined against all of its 16 most-traded peers tracked by Bloomberg except Taiwan’s dollar and the South Korean won. It was little changed against its U.S. counterpart at C$1.0425 at 5 p.m. in Toronto after appreciating earlier to C$1.0398, the strongest since Oct. 24. One Canadian dollar buys 95.92 U.S. cents.

Government bonds pared gains to trade little changed. The benchmark 10-year note yielded 2.49 percent, while the price of the 1.5 percent debt due in June 2023 rose 2 cents to C$91.61.

Confidence Rises

The loonie gained earlier versus the U.S. dollar as the Bloomberg Nanos Canadian Confidence Index, a weekly measure of the economic mood of Canadians, advanced to 58.5 in the seven days through Nov. 1 from 57.7 the previous week. The share of people in the survey giving positive responses on home prices rose to 38.6 percent from 38.0 percent, the highest level in three months.

“This shows that naysayers of the housing market were wrong,” Adam Button, a currency analyst at forexlive.com, said by telephone from Montreal. “Housing will continue to be a key driver of consumer confidence and the economic recovery.”

The housing market remains one of the strongest parts of the economy after years of support from low interest rates and a solid labor market. Output rose 0.3 percent to an annualized C$1.59 trillion, Statistics Canada said Oct. 31 in Ottawa, beating the 0.1 median forecast in a Bloomberg economist survey.

Oil Discount

The discount faced by benchmark crude Western Canada Select, to West Texas Intermediate, swelled to $40.75 per barrel, the biggest gap since Jan. 14, Bloomberg data show. It reached a record $42.50 in December. The 2013 average is $23.39.

Enbridge Inc., the owner of Canada’s largest oil-pipeline network, said in a Nov. 1 notice to crude shippers that its main export pipeline was overbooked for the month. Routes out of the landlocked oil sands proposed by Calgary-based Enbridge are key to relieving bottlenecks plaguing exports out of the world’s third-largest proven oil reserves, after Saudi Arabia and Venezuela.

Crude-oil futures for December delivery traded at $94.45 a barrel in New York after touching $94.06, the lowest level since June 26.

Implied volatility for one-month options on Canada’s dollar versus its U.S. counterpart fell to 5.6 percent from this year’s high of 9.4 percent in June. The measure is used to set option prices and gauge the expected pace of currency swings. The average for this year is 6.5 percent.

Canada’s dollar has lost 2.6 percent this year among 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The greenback has gained 2.9 percent and the euro has risen 5.7 percent, while Australia’s dollar has dropped 6.8 percent.

To contact the reporter on this story: Cecile Gutscher in Toronto at cgutscher@bloomberg.net

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

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