Canada’s dollar weakened for a third day against its U.S. counterpart as risk appetite waned after the European Central bank failed to introduce sufficient steps to address the region’s debt crisis.
The Canadian currency fell against most of its 16 major peers amid declines in stocks and crude oil, the nation’s biggest export. It rose against the euro after ECB President Mario Draghi said details of a plan to buy enough sovereign bonds to remove doubts about the shared currency’s future would be fleshed out in coming weeks. Data tomorrow may show the U.S., Canada’s largest trading partner, added 100,000 jobs in July.
“The one puzzle in the Canadian dollar is that it’s been holding up better than one might have expected, given all the concerns about global growth,” Avery Shenfeld, chief economist at Canadian Imperial Bank of Commerce, said in a phone interview from Toronto. “Whatever jitters we have on global growth are now playing two ways on the Canadian dollar: they’re negative on the prices of resources we export, but a plus for bond inflows into a safe haven.”
Canada’s currency, nicknamed the loonie, weakened 0.2 percent to C$1.0074 per U.S. dollar at 5 p.m. Toronto time. It appreciated earlier to C$1.0002, the strongest since May 15, the last time the two currencies were at parity. One Canadian dollar buys 99.27 U.S. cents.
The loonie gained as much as 0.8 percent versus the euro to C$1.2197 before trading at C$1.2271, up 0.2 percent.
Crude oil for September delivery fell 1.8 percent to $87.31 a barrel in New York, and the Standard & Poor’s GSCI Index of raw materials lost 1.1 percent. Raw materials including oil account for about half of Canada’s export revenues. The S&P 500 Index dropped 0.7 percent.
Canadian government bonds rose, sending the benchmark 10-year yield down four basis points, or 0.04 percentage point, to 1.67 percent. The price of the 2.75 percent securities due in June 2022 gained 36 cents to C$109.74.
Initial claims for jobless benefits in the U.S. rose less than forecast last week, climbing to 365,000 in the week ended July 28, according to Labor Department figures today in Washington.
The U.S. employment report for July, to be released tomorrow, is expected to show payrolls increased by 100,000 after an 80,000 gain in June, according to the Bloomberg survey median. The jobless rate, which has remained above 8 percent since February 2009, is projected at 8.2 percent for a third straight month.
“If the number comes in extremely soft, I think whatever risk-on trades that are still out there, they will certainly be looking toward the exit,” Dean Popplewell, head analyst in Toronto at the online currency-trading firm Oanda Corp., said in a telephone interview. “That will certainly hurt the commodity currencies.”
The loonie fell yesterday after the Federal Reserve refrained from adding monetary stimulus while pledging to take new policy steps as needed to promote stronger economic growth and employment.
“The Fed was rather transparent in following the leader, and the leader was going to be the ECB,” Popplewell said. “The market is being told to take a look at every economic indicator, and we are now to second-guess what’s coming in September.”
Canada’s currency has appreciated 2.6 percent this year against nine major counterparts tracked by Bloomberg Correlation-Weighted Indexes. The U.S. dollar has added 0.9 percent, while the euro has tumbled 5.9 percent.