Loonie’s Two-Day Rally Is Biggest Since May on Risk Demand

Canada’s dollar had its biggest two-day rally against its U.S. counterpart since May as a gain in stocks and commodities boosted demand for assets related to economic growth.

The loonie, as Canada’s currency is also known for the image of the aquatic bid on the C$1 coin, was among the best performers among the greenback’s most-traded counterparts before a report tomorrow forecast by economists to show the nation’s employers added to payrolls for a second month in November.

“The outperformance is quite stark,” Camilla Sutton, chief currency strategist in Toronto at Bank of Nova Scotia’s Scotia Capital unit, said by phone from Toronto.

The Canadian currency appreciated 1.4 percent to C$1.0026 per U.S. dollar at 5 p.m. in Toronto, from C$1.0170 yesterday, when it advanced 0.9 percent. It touched C$1.0026 today, the strongest since Nov. 11. One Canadian dollar purchases 99.71 U.S. cents.

The loonie increased 2.3 percent during the past two days, the most on a closing basis since May 10, when it gained 2.9 percent as crude oil rallied on a European plan to ease the sovereign-debt crisis. The Canadian dollar touched a level stronger than parity Nov. 5-11.

The yield on 10-year Canadian government bonds rose three basis points, or 0.03 percentage point, to 3.20 percent after touching 3.25 percent, the highest level since July 28. The price of the 3.5 percent security maturing in June 2020 decreased 23 cents to C$102.50.

U.S. Yield Spread

Canada’s 10-year bonds yielded 20 basis points more than the equivalent-maturity U.S. security. The yield spread was 37 basis points on Oct. 7, the widest since January 2009.

The MSCI World Index, a gauge of equities in developed nations, advanced 1.8 percent. January futures on crude oil increased $1.25 to $88 a barrel, the highest settlement in more than two years.

Canada’s dollar should continue climbing “provided equities remain better bid and the U.S. dollar stays better offered,” Jack Spitz, managing director of foreign exchange at National Bank of Canada, said by telephone from Toronto.

The loonie extended its gain as a U.S. report from the National Association of Realtors showed pending home resales for Canada’s biggest trading partner unexpectedly increased 10 percent in October.

Canada added 19,800 jobs last month after an increase of 3,000 in October, according to the median forecast of 24 economists in a Bloomberg News survey. The unemployment rate is expected to be unchanged at 7.9 percent. The report from Statistics Canada is due at 7 a.m. tomorrow in Ottawa.

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