Canada’s Dollar Drops as European Debt Crisis Weighs on Currency

Canada’s dollar fell against all of its 16 most-traded counterparts tracked by Bloomberg as Europe’s sovereign-debt concern weighed on the currency.

The loonie, as the Canadian dollar is also known, fluctuated against the greenback after yesterday’s biggest gain in two weeks. The Canadian currency was little changed for the week as the Italian Senate approved an austerity package as part of measures to contain fiscal turmoil. Canada’s bond market is closed today in observance of Remembrance Day.

“The overarching theme is still uncertainty and volatility,” said Shaun Osborne, chief currency strategist at Toronto-Dominion Bank in Toronto. “In that environment, we would expect the Canadian dollar to struggle somewhat.”

Canada’s currency traded at C$1.0185 per U.S. dollar at 9:34 a.m. in Toronto, after rising 0.8 percent yesterday, the most since a 1.3 percent increase Oct. 27. It touched C$1.0266 yesterday, the weakest since Oct. 13. One Canadian dollar buys 98.33 U.S. cents.

Implied volatility for the currencies of the Group of Seven nations touched 13.68 percent yesterday, the highest level since Oct. 6, according to a JPMorgan Chase & Co. index. It was 13.03 percent today.

The Canadian dollar remained lower versus its major counterparts even as global stocks and commodities rose. The MSCI World Index of equities added 1.5 percent, and crude oil, Canada’s largest export, rose 0.9 percent to $98.47 a barrel.

Italy’s Senate approved debt-reduction measures today in an attempt to shore up investor confidence and pave the way for a new government that may be led by former European Union Competition Commissioner Mario Monti.

Italian Vote

The timing of the ballot was moved forward after Prime Minister Silvio Berlusconi’s parliamentary majority unraveled this week, leading bond yields to surge to euro-era records. The yield on the nation’s benchmark 10-year bond rose above 7 percent this week, increasing concern Italy will follow Greece, Portugal and Ireland in seeking financial assistance from the European Union and the International Monetary Fund.

The U.S. State Department’s decision to delay its review of TransCanada Corp.’s $7 billion Keystone XL pipeline until after next year’s presidential election may doom the project and accelerate Canada’s efforts to ship crude oil to Asia, according to Canadian Finance Minister Jim Flaherty.

“The decision to delay it that long is actually quite a crucial decision,” Flaherty said yesterday in an interview at the Asia-Pacific Economic Cooperation summit in Honolulu. “I’m not sure this project would survive that kind of delay. It may mean that we may have to move quickly to ensure that we can export our oil to Asia through British Columbia.”

The loonie is down 4.2 percent this year for the worst performance among 10 developed-nation currencies, according to Bloomberg Correlation-Weighted Currency Indexes. The yen has increased 2.1 percent.

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