Canada’s dollar fell for a fourth consecutive session amid declines in stocks and commodities as concern the global economic recovery is faltering lifted such traditional safety assets as the yen.
The yen rose against all of the 16 most-traded currencies as U.S. Federal Reserve officials yesterday pledged to keep the benchmark interest rate at a record low for an “extended period” and signaled that European indebtedness may harm American growth. Crude oil declined 0.2 percent and the MSCI World index of shares fell for a third day.
“Poor economic data and fears from the European banking have led to risk coming off and weakness in commodity currencies,” said Darren Richardson, senior corporate dealer in Toronto at CanadianForex Ltd., an online foreign-exchange dealer. “This is weighing on the Canadian dollar.”
The currency depreciated 0.4 percent to C$1.0439 per U.S. dollar at 4:04 p.m. in Toronto, compared with C$1.0397 yesterday. One Canadian dollar buys 95.80 U.S. cents. Its four-day losing streak is the longest since Jan. 29.
The loonie has gained 8.3 percent this year, according to Bloomberg Correlation-Weighted Currency Indices, the second-best performance among its 10 developed-world counterparts. Canada is hosting meetings that begin tomorrow of Group of Eight and Group of 20 countries.
“The fear is that weaker U.S. data is posing a risk to the Canadian economy,” Camilla Sutton, director of currency strategy at Bank of Nova Scotia, Canada’s third-largest lender, said by phone from Toronto. “And the G-20 is really focused on fiscal restraint as opposed to supporting growth. That probably isn’t good for the growth currencies.”
‘Limit the Downside’
The Standard & Poor’s 500 Index declined 1.7 percent. The yield on Canada’s 10-year bond touched 3.175 percent, the lowest in more than a year. The price of the 3.5 percent security due in June 2020 advanced as much as 48 cents to C$102.75.
The loonie is poised for a 1.8 percent decline this week, after rising the two previous weeks.
“Support at C$1.0360 is expected to limit the downside” in the U.S. dollar versus the Canadian dollar, George Davis, chief technical analyst for fixed-income and currency strategy in Toronto at Royal Bank of Canada, wrote in a note to clients. “An hourly close above C$1.0410 would project greater gains toward C$1.0452 and C$1.0516.”
The loonie is emerging as a reserve currency for central bankers seeking alternatives to debt-laden governments in Europe, the U.S. and Japan. Canada, the last member of the group of Seven industrialized nations to enter the global recession, was the first to recover, thanks partly to having the G-7’s lowest debt-to-GDP ratio and the world’s soundest financial system, according to the World Economic Forum.
Russia may add Australian and Canadian dollars to its international reserves for the first time after fluctuations in the U.S. currency and euro, Alexei Ulyukayev, the first deputy chairman of the nation’s central bank, said in an interview in Moscow on June 15. UBS AG, the world’s second-largest foreign- exchange trader, predicts the International Monetary Fund may include the Canadian dollar in a basket of currencies it uses in transactions.
Canadian Prime Minister Stephen Harper, in a letter to his G-20 counterparts, said he wants leaders to agree to a target of reducing deficits by half by 2013, and to stabilize or begin reducing their ratios of debt-to-output by 2016.