May 9 (Bloomberg) -- Canada’s dollar climbed for a second day against its U.S. counterpart as a rebound in commodities following the steepest weekly slump since 2008 overshadowed the reduction of Greece’s credit rating by Standard & Poor’s.
The loonie, as the currency is known for the image of the aquatic bird on the C$1 coin, erased losses as crude oil, the nation’s biggest export, rallied along with silver and wheat. The Canadian currency fell earlier as the cut in Greece’s credit rating sapped demand for higher-yielding assets.
“Commodities are the key to this,” said John Curran, a senior vice president in Toronto at CanadianForex Ltd., an online foreign-exchange dealer. “Europe obviously may play into it, but the longer-term trend is going to be based off of what commodities do.”
The loonie appreciated 0.5 percent to 96.18 cents versus the greenback at 5:00 p.m. in Toronto, from 96.66 on May 6. The day before that it slipped to 97.13, the weakest level since April 18. One Canadian dollar buys $1.0397.
Last week’s rout in commodities prompted Goldman Sachs Group Inc., which forecast the plunge, to predict a possible recovery. The S&P GSCI Index of 24 raw materials jumped as much as 2.5 percent, the most since March 17, following last week’s slide of 11 percent.
Greece’s credit rating was cut two levels to B from BB- by S&P, which said further reductions are possible as the risk of default rises.
“You’re seeing a slow realization in public, at least by the Europeans, that this cannot continue,” said Joseph Trevisani, chief market analyst at FX Solutions Inc. in Saddle River, New Jersey. “We may see more of this.”
Canadian government bonds rose, pushing the 10-year yield down one basis point, or 0.01 percentage point, to 3.18 percent. The price of the 3.25 percent security maturing in June 2021 increased 7 cents to C$100.58.
Crude oil for June delivery climbed 5.9 percent to $102.91 a barrel on the New York Mercantile Exchange. Last week oil had the largest slump since December 2008. Raw materials including crude account for about half of Canada’s export revenue.
“The fundamental picture of the world’s economy hasn’t changed at all,” Trevisani said. “We’ve had a huge bubble in the commodities.”
Silver futures jumped as much as 7.6 percent after losing 27 percent, the most since at least 1975, last week. Wheat advanced for a second day.
The Thomson Reuters/Jefferies CRB Index of commodities advanced 2 percent to 344.10 after tumbling 9 percent last week, the most since December 2008.
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