Canada’s Dollar Rallies as Crude Oil Touches Three-Month High

Canada’s dollar rose against all of its 16 most-traded counterparts as crude oil, the nation’s largest export, touched the highest level in three months.

The currency extended its gain versus the U.S. dollar on buoyed demand for higher-yielding assets as North American stocks advanced after the European Central Bank Executive Board member Juergen Stark said in Switzerland that the euro region’s debt crisis will be under control in two years.

“The Canadian dollar is still something that people like in terms of the fundamental backdrop,” Brian Kim, a currency strategist at Royal Bank of Scotland Group Plc’s RBS Securities unit in Stamford, Connecticut, said in a phone interview. “Europe has been the larger focus. The commodity story has definitely been driving it as well.”

Canada’s currency appreciated 0.6 percent to C$1.0126 per U.S. dollar at 5 p.m. in Toronto. One Canadian dollar buys 98.76 U.S. cents. The loonie, as the currency is known, fell 2.7 percent last week in its first five-day decline since September. Among major counterparts today, it had its biggest gain versus the Swiss franc, rising 2.4 percent to 88.95 centimes.

Futures on crude oil gained 1.6 percent to $95.96 a barrel in New York trading and touched $96.11, the highest level since Aug. 1. The Standard & Poor’s 500 Index increased 0.6 percent. The S&P/TSX Composite Index gained 0.4 percent.

Greek Prime Minister George Papandreou said he’ll step down to make way for a coalition government and secure outside financing to avoid a collapse of the nation’s economy.

Italian Prospects

The news agency Ansa said Prime Minister Silvio Berlusconi denied a report by Giuliano Ferrara, his former spokesman and editor of the newspaper Il Foglio, who wrote today that the premier would step down “within hours.” Berlusconi will likely resign next week in return for support in a vote on austerity and economic-growth measures, Ferrara said in a phone interview after his initial report.

Two-year bonds dropped, with yields up two basis points, or 0.02 percentage point, to 0.95 percent after falling last week 16 basis points in the first decrease since the five days ended Sept. 23.

The yields ended the week at 0.93 percent, down from this year’s high of 1.96 percent on Feb. 15. The spread between yields on two-year Canada government bonds and Treasuries of the same maturity was little changed at 72 basis points.

Canadian Auction

Canada will sell C$3.5 billion ($3.5 billion) of 1 percent bonds due in February 2014 on Nov. 9, according to the Bank of Canada’s website. The previous auction of two-year bonds on Oct. 19 produced an average yield of 1.097 percent and a bid-to-cover ratio of 2.38, compared with a five-auction average of 2.47, Bank of Canada figures show.

Canadian Finance Minister Jim Flaherty may say he won’t be able to fulfill his plan to balance the budget within three years in an update of the government’s fiscal plan to be released as early as tomorrow.

Flaherty may update his projections at a luncheon speech to the Calgary Chamber of Commerce, according to two people familiar with the plan who spoke on condition they not be identified because the event has not yet been announced.

The loonie has dropped 4.4 percent this year in the worst performance among 10 developed-nation currencies, according to Bloomberg Correlation-Weighted Currency Indexes. The greenback is down 2.4 percent.