Aug. 4 (Bloomberg) -- Canada’s dollar weakened by the most in more than a year as investors spurned risk-associated assets on concern the global economy is slowing.
The Canadian currency fell to the lowest since June 29 before a government report tomorrow that economists predict will show the nation’s employers added jobs for a fourth straight month. An index of stocks in developed nations dropped for a seventh day and crude oil, Canada’s biggest export, fell below $87 a barrel.
“What you’re seeing is the market coming unhinged as it’s unnerved at the plight of the global recovery,” said Brian Dolan, chief strategist at FOREX.com, a unit of online currency trading firm Gain Capital in Bedminster, New Jersey. “The commodity complex is getting destroyed and the Canadian dollar is suffering along with the risk currencies.”
The Canadian currency weakened 2 percent to 98.15 cents per U.S. dollar at 5 p.m. in New York, compared with 96.21 cents yesterday. One Canadian dollar buys $1.0189.
The Bank of Japan followed its Swiss counterpart in easing monetary policy, with Finance Minister Yoshihiko Noda saying the Japanese action was unilateral following joint yen sales by Group of Seven nations in March. The yen fell as much 4.1 percent against the dollar, the biggest drop since a 6.1 percent decline on Oct. 28, 2008, and surpassing the 3.9 percent drop at the previous intervention on March 18.
“For the time being, they’ll probably achieve their objective of trapping it into a range,” said Adam Cole, head of global currency strategy at Royal Bank of Canada, by phone from London., referring to the yen. “The overwhelming risk longer term is that dollar-yen does go back to new lows.”
Government bonds rose, pushing the yield on Canada’s benchmark 10-year note 16 basis points lower to 2.5 percent. A basis point is 0.01 percentage point. The 3.25 percent security maturing in June 2021 increased $1.45 to C$106.48.
The loonie remained lower after European Central Bank President Jean-Claude Trichet said the ECB has resumed bond purchases and will offer banks more cash to stop the region’s debt crisis from engulfing Italy and Spain and hurting the economy.
Canada’s currency fell versus 10 of its 16 most-traded counterparts today as the MSCI World Index, a measure of stocks in developed nations, tumbled more than 4 percent. Oil dropped to the lowest since February, erasing all of this year’s gains. Crude for September delivery declined 5.8 percent to $86.63 a barrel in electronic trading in New York.
“In this environment, and absent any domestic data, we would expect the Canadian dollar to continue to underachieve,” Shaun Osborne and Jacqui Douglas, currency strategists at Toronto-Dominion Bank’s TD Securities unit, wrote in a note to clients. “Key resistance for funds stands at 98.14 cents, where the 200-day moving average, which has provided solid resistance since September last year, resided.”
Resistance refers to the upper boundary of a trading range, in this case for the U.S. dollar versus the Canadian dollar, where sell orders may be clustered.
Canada’s dollar has declined 3.8 percent this year versus the currencies of nine other developed nations in the second-worst performance, according to Bloomberg Correlation-Weighted Currency Indexes. The greenback has fallen 5.7 percent and the yen has lost 3.1 percent of its value.
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