Canada Dollar Gains Versus Most Peers on Central Banks’ Stimulus

Canada’s dollar rose against most of its 16 major counterparts after global central banks added monetary stimulus to boost economic growth.

The currency weakened yesterday against its U.S. counterpart even after Canada’s jobless rate fell to 7.2 percent in June from 7.3 percent in May. Employers in the U.S. hired fewer workers than forecast in June, showing scant progress toward reducing joblessness in America, which is Canada’s largest trading partner. The loonie, as the currency is nicknamed, reached a two-year high against the euro after the European Central Bank cut its key interest rate, while the Bank of Canada is forecast to hold its policy rate unchanged on July 17.

“The growth in North America is not ideal, it’s not great, but it’s definitely better than what’s going on in Europe,” Brian Kim, a currency strategist at Royal Bank of Scotland Group Plc’s RBS Securities unit in Stamford, Connecticut, said in a telephone interview.

Canada’s currency rose 2.7 percent to C$1.2527 per euro, the biggest weekly gain since March 2, and touched the strongest level since June 2010. It fell 0.3 percent to C$1.0196 per U.S. dollar in Toronto. One Canadian dollar buys 98.08 U.S. cents.

Currency Measure

The loonie rose 1.2 percent this week, trailing two of nine counterparts, according to Bloomberg Correlation-Weighted Indexes. The U.S. dollar added 1.6 percent and yen appreciated 1.8 percent.

Canada’s dollar will end the year at C$1.02, according to the median forecast in a Bloomberg News survey of economists. Estimates ranged from 95 Canadian cents to C$1.13 per U.S. dollar.

Ten-year government bonds rose for the second week. Yields fell five basis points, or 0.05 percentage point, during the past five days, to 1.69 percent. It touched 1.615 percent on June 1, the lowest since 1950, according to Bloomberg and Bank of Canada data.

The Bank of Canada will sell C$3.4 billion ($3.3 billion) of five-year notes on July 11. The bonds mature Sept. 1, 2017 and carry a coupon of 1.5 percent.

Pacific Investment Management Co.’s Ed Devlin said Canadian bonds don’t provide much value for investors as low yields limit scope for capital gains and global uncertainty prompts the world’s largest bond fund manager to take “defensive” positions.

Bond View

“We’re not particularly long the Canadian market,” Devlin, a London-based portfolio manager, said in a telephone interview from Toronto. “I’m pretty defensive on the front end. There is not a lot to like about interest rates down here.” A long position is a bet that an asset will increase in value

Europe’s central bank cut its key interest rate by 25 basis points to a record 0.75 percent and reduced its deposit rate to zero for the first time. China cut interest rates for the second time in a month and the Bank of England extended its asset-purchase program.

Investors have been paring bets Bank of Canada Governor Mark Carney will lower interest rates as concern about Europe’s debt crisis eases. Swaps trading suggested yesterday that investors are pricing in a 31 percent chance that Carney will lower borrowing costs by at least 25 basis points this year, down from 76 percent odds on June 1.

Bank Meeting

The BOC will meet July 17 and is scheduled to update its forecasts in a monetary policy report to be published July 18. Carney has held the benchmark rate at 1 percent since September 2010, the longest pause since the 1950s.

Yesterday’s jobs data add to evidence Canada’s economy picked up momentum in the second quarter, following a slowdown that began at the end of last year. Canada’s payrolls rose by 7,300 in June, Statistics Canada said from Ottawa. Economists surveyed by Bloomberg predicted the unemployment rate would remain unchanged and employment would rise 5,000.

“It’s a mixed report -- not bad news but far from great news,” said Andrew Cox, a currency strategist at Citigroup Inc. in New York. “The particulars of the report will likely have only a minor influence on the trajectory of the Canadian dollar in the coming weeks. Global factors dominate.”

U.S. payrolls rose 80,000 last month after a 77,000 increase in May, Labor Department figures showed yesterday in Washington. Economists projected a 100,000 gain, according to the median estimate in a Bloomberg News survey. The unemployment rate held at 8.2 percent.

The Standard & Poor’s 500 Index fell 0.6 percent this week and futures on crude oil, Canada’s largest export, dropped 0.6 percent to $84.45 a barrel in New York.

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