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Canadian Dollar Trades Touches Lowest Level in 10 Weeks

The Canadian currency touched the lowest level since January as it fluctuated before the Bank of Canada releases its monetary policy report next week.

Canada’s dollar saw gains sputter even as global equities and crude oil, two principal drivers of the nation’s exchange rate, advanced. The so-called loonie climbed earlier today as much as 0.4 percent. It had its biggest loss against the Australian dollar among the most-traded currencies tracked by Bloomberg.

“Very disappointing price action for the Canadian dollar today, with stocks positive and commodities stable,” Steve Butler, managing director in Toronto at Bank of Nova Scotia’s Scotia Capital unit, wrote by e-mail. “There are a lot of nervous long Canadian-dollar positions,” he said, referring to bets that the currency will increase in value.

The currency was little changed at C$1.0038 per U.S. dollar at 5 p.m. in Toronto after appreciating earlier to C$1.0009. It touched C$1.0053, the weakest level since Jan. 31. One Canadian dollar buys 99.62 U.S. cents.

“I think C$1.0050 to C$1.0070 is still the place to buy the Canadian dollar,” said Scotia Capital’s Butler. “However, if there’s a close at about that level, I will exit my long Canadian dollar position. At that point I’ll have to reassess things completely.” A long position is a bet that a currency will strengthen.

The loonie has traded in a two-cent range of 98.42 cents to C$1.0054 since the end of January.

“We’ve been stuck in a range for months, and a clean break should open up for a decent move higher,” Butler said.

Government Bonds

Ten-year government bonds fell for the first time in three days, pushing the yields up three basis points, or 0.03 percentage point, to 2.01 percent. The yields fell yesterday to below 2 percent for the first time since March 13.

The Standard & Poor’s 500 Index rose 0.7 percent today after dropping 1.7 percent yesterday. Crude for May delivery increased 1.7 percent to $102.59 a barrel in New York.

Canada auctioned C$3.3 billion ($3.3 billion) of two-year bonds at an average yield of 1.264 percent. The bid-to-cover ratio was 2.55 for the 2.25 percent notes. The auction of two-year bonds on Feb. 29 drew an average yield of 1.116 percent.

The loonie advanced earlier as gains in equities and commodities burnished the appeal of riskier assets and a report showed Canadian housing starts accelerated last month.

“We quite like the Canadian dollar as a currency,” said Ankita Dudani, a foreign-currency strategist at Royal Bank of Scotland Group Plc, by phone from London. “More likely than not, the Bank of Canada should revise up the domestic and international outlook. Conditions have improved in Canada, the U.S. and globally as well.” RBS is long on the currency versus the euro and the greenback, she said.

Housing Starts

Housing starts rose in March to 215,600 at a seasonally adjusted annual pace from a revised 205,300 in the prior month, Canada Mortgage and Housing Corp. said today on its website. Economists forecast a reading of 200,000, according to the median of 18 responses to a Bloomberg News survey.

Bank of Canada Governor Mark Carney said in an April 2 speech that the Canadian economy is stronger than the central bank had forecast. Policy makers will meet April 17 to set rates and will release their quarterly policy report the next day.

The Canadian currency will strengthen to 98 cents per U.S. dollar by year-end, according to the median forecast of economists in a Bloomberg News survey.

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