Canada’s dollar fell against its U.S. counterpart after Greece political leaders indicated that talks had failed and elections will be held, boosting demand for refuge from Europe’s debt crisis.
The currency, nicknamed the loonie for the image of the bird on the C$1 coin, strengthened against most of its 16 most-traded currencies as Canadian existing home sales rose 0.8 percent in April from the previous month, the Canadian Real Estate Association said in a statement. Canadian stocks and crude oil, the nation’s biggest export, declined.
“The glass has been half full and half empty for the loonie, as Greece has not been able to calm investor concern even as Canadian fundamentals continue to improve,” said Doug Porter, deputy chief economist at Bank of Montreal’s BMO Capital Markets unit in Toronto. “The Canadian dollar is one of the more stable currencies and will strengthen once the clouds part in Europe. But until then it is subject to bouts of weakness.”
The Canadian currency fell 0.4 percent to C$1.0072 at 5 p.m. in Toronto. It gained as much as 0.5 percent earlier and fell 0.2 percent. One Canadian dollar buys 99.29 U.S. cents.
The loonie gained 0.4 percent against the euro to C$1.2822 and strengthened 0.6 percent against the New Zealand dollar to 77.49 Canadian cents.
Canada’s government bonds fell, pushing yields on the two-year note up two basis points, or 0.02 percentage point, to 1.29 percent. The 0.75 percent securities maturing in May 2014 declined 3 cents to C$98.97 cents.
The loonie gained earlier as the Canadian Real Estate Association reported sales of existing homes increased in April for a third month, rising 0.8 percent. Manufacturing in the New York region expanded more than forecast, according to the Federal Reserve Bank of New York’s general economic index. The gauge, known as the Empire State Index, increased to 17.1 this month from 6.6 in April, topping a Bloomberg News survey’s forecast for a reading of 9.
The Canadian currency erased gains after Greek President Karolos Papoulias’ meeting with political leaders in Athens failed to produce a government after an inconclusive May 6 vote. He called for a meeting tomorrow to form a caretaker government.
A second election threatened to extend the country’s political gridlock and reignited speculation Greece will renege on its pledges to cut spending, required by the terms of its 240 billion euros ($306 billion) in bailouts.
Crude oil for June delivery dropped 0.9 percent to $93.90 a barrel in New York, approaching yesterday’s low of $93.65, the least since December. The Standard & Poor’s/TSX Composite Index fell 1.3 percent, while the S&P 500 Index dropped 0.6 percent.
‘Will Hold In’
“The internal Canada story of better data and a more hawkish tone from the central bank has allowed the currency to withstand some of the pressure from the global risk story and falling oil prices,” said Mark Chandler, head of fixed-income strategy at Royal Bank of Canada’s RBC Capital Markets unit, by phone from Toronto. “The global risk sentiment will catch up with the loonie if things get worse, but long term the currency will hold in.”
Bank of Canada policy makers said after their last meeting on April 17 that raising the benchmark interest rate might be necessary as growth and inflation quicken. They have held the rate at 1 percent since September 2010.