May 2 (Bloomberg) -- Canada’s dollar slid from almost the highest level in more than three years on speculation the New Democratic Party will deny Conservatives a majority in today’s election and as crude oil dropped.
The loonie has fallen since April 20 against most of its major counterparts amid concern the NDP may end up with a share of power or create gridlock for Prime Minister Stephen Harper’s Conservative minority government. At stake are tax reductions worth C$6 billion ($6.3 billion) annually for businesses such as Toronto-based Bank of Nova Scotia, which both the NDP and the Liberals have pledged to reverse.
“The Harper government has been remarkably responsible and successful,” said Joseph Trevisani, chief market analyst at FX Solutions in Saddle River, New Jersey. “If you end up weakening or removing a successful government, the success of the replacement government is certainly unproved and perhaps could be worrisome considering its particular political bent.”
The loonie, as the Canadian currency is known for the image of the aquatic bird on the C$1 coin, depreciated 0.6 percent to 95.06 cents versus the greenback at 5:00 p.m. in Toronto, from 94.51 cents on April 29. One Canadian dollar buys $1.0520. It was the biggest decline on an intraday basis since April 18. The Canadian currency touched 94.46 cents on April 29, the strongest level since November 2007.
Polls indicate the likeliest outcome of the election is that Harper, in power since 2006 and leader of his party since 2003, will win his third consecutive minority government. The Conservatives had 37 percent support among decided voters, according to a CTV/Globe/Nanos tracking poll published May 1. That’s down from a campaign high of 42 percent on April 4.
The NDP had 32 percent support, a gain of 12 percentage points from the first poll of the campaign. The Liberals had 21 percent, down from 29 percent. The Bloc Quebecois, which supports separation from Canada and only runs candidates in the French-speaking province, fell to 5.7 percent from 9.1 percent. The telephone poll, taken April 30 and May 1, surveyed 1,200 eligible voters and has a margin of error of 2.8 percent.
Harper has said the NDP’s platform, which promises C$68.9 billion of new spending, will create a “lot of destruction” for the economy because it would increase corporate tax rates and implement a cap-and-trade system for carbon that would boost the price of gasoline.
‘Increase in Concern’
“We’ve certainly seen an increase in concern in what a strengthening base of the NDP would mean going forward,” said Camilla Sutton, chief currency strategist at the capital markets unit of Bank of Nova Scotia in Toronto. “In terms of the market, there are a few issues. One is certainly the fiscal side, and the other side would be any potential impact on oil production in Canada.”
Futures on crude oil, Canada’s biggest export, slid 0.8 percent to $112.99 a barrel after falling as much as 2.7 percent to $110.82. Silver futures decreased 9.8 percent to $43.85 an ounce after falling as much as 13 percent to $42.20 an ounce. Raw materials including oil account for about half of Canada’s export revenue.
Canadian government bonds were little changed, with the yield on the 10-year security down less than one basis point, or 0.01 percentage point, to 3.20 percent. The price of the 3.5 percent security maturing in June 2020 rose 2 cents to C$102.34.
Canadian manufacturers’ costs for their raw-materials and the prices of their finished goods rose in March faster than economists forecast as crude oil rose.
The raw-materials price index increased 5.7 percent, the fastest since June 2009, Statistics Canada reported today in Ottawa. The gain exceeded all 11 forecasts in a Bloomberg News survey of economists. The industrial-product price index climbed 0.9 percent, higher than the median forecast of 0.7 percent in a survey of 14 economists.
To contact the reporter for this story: John Detrixhe in New York at email@example.com
To contact the editor responsible for this story: Dave Liedtka at firstname.lastname@example.org