Canada’s dollar rallied to its strongest level in a week against its U.S counterpart, tracking gains in global equities and commodities, amid speculation slowing growth in China will spur more monetary stimulus.
The currency advanced against the majority of its most-traded peers, heading for a weekly rise versus the greenback, before Bank of Canada policy makers meet next week to determine interest rates. The loonie, as the currency is nicknamed, touched the strongest level versus the euro since the shared currency began trading in 1999.
“We like the commodity currencies, medium-term,” Stephen Gallo, a foreign-exchange strategist at Credit Agricole SA in London, said in a telephone interview. “If the euro becomes overbought versus these currencies we are definitely a seller on rallies,” he said referring to sales of the euro against commodity currencies.
The loonie added 0.5 percent to C$1.0141 per U.S. dollar at 5 p.m. in Toronto, touching the strongest level since July 5. One Canadian dollar buys 98.61 cents. The loonie touched C$1.2378 versus the euro.
The Standard & Poor’s 500 Index rose 1.7 percent, while the Thomson Reuters/Jefferies CRB Index of raw materials added 1.3 percent. Gold rose 1.1 percent to $1,589.60 per ounce, and crude oil futures rose 1.1 percent to $87.05 per barrel.
Canada’s currency has traded this year as strong as 98 cents per U.S. dollar on April 27 and as weak as C$1.0447 on June 4.
Canada’s currency may continue to strengthen against the euro after monthly averages crossed a technical level, according to JPMorgan Chase & Co. The loonie extended below C$1.2451 against the euro yesterday, a two-year low and the long-term support zone since 2000, Niall O’Connor, a New York-based technical analyst at the firm, wrote in a note to clients today.
It may appreciate to as much as C$1.2150 against the euro, he wrote, with C$1.2730 is the next resistance level.
In technical analysis, investors and analysts study charts of trading patterns and prices to forecast changes in a security, commodity, currency or index. Resistance is a level on a chart where sell orders may be clustered.
Government-bonds were little changed, with yields on benchmark 10-year at 1.63 percent. The security reached a record low of 1.615 percent on June 1. The 2.75 percent securities maturing in June 2022 dropped four cents to C$110.15.
Deutsche Bank AG advised investors to avoid shorter-maturity Canadian fixed-income securities after a recent rally in the debt that’s been driven by speculation the country’s central bank is more influenced by slowing global economic growth than by signs of domestic strength.
The Bank of Canada’s next interest-rate announcement July 17 may disappoint investors speculating that policy makers are reconsidering an end to stimulus measures, according to economists led by John Clinkard. Deutsche Bank recommends selling December 2012 bankers’ acceptance contracts.
“The bank is going to stay on hold,” Matthew Perrier, Toronto-based director of foreign exchange at Bank of Montreal, said in a telephone interview. “The bank is going to be cognizant of the global picture.”
The central bank will raise its 1 percent overnight target rate by a quarter-percentage point by the second quarter of 2013, according to the weighted forecast in a Bloomberg survey of 19 economists.
The European Central Bank is prepared to ease monetary policy, including cutting its deposit rate further, if the region’s financial crisis worsens, according to a Medley Global Advisors report obtained by Bloomberg News.
China’s growth slowed for a sixth quarter to the weakest pace since the global financial crisis, putting pressure on Premier Wen Jiabao to boost stimulus to secure a second-half economic rebound.
Gross domestic product expanded 7.6 percent last quarter from a year earlier, the National Bureau of Statistics said today in Beijing. The pace, a three-year low, compares with an 8.1 percent gain in the previous period and the 7.7 percent median forecast of economists.
The loonie has gained 2.5 percent this year among 10 developed-nation currencies in Bloomberg Correlation Weighted Indexes, with the U.S. dollar adding 1.7 percent.