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Canadian Dollar Declines for Third Week as Risk Aversion Rises

Canada’s dollar weakened for a third week versus its U.S. counterpart, the longest stretch of losses since June, on concern demand for natural resources will decline as investors question global-growth prospects.

The currency touched the lowest level since August yesterday as crude oil, the nation’s largest export, depreciated for a second week. Bank of Canada Governor Mark Carney said on Oct. 24 that the need for higher interest rates has become “less imminent,” a day after strengthening the case for tightening monetary policy. Statistics Canada is scheduled to report changes in October unemployment on Nov 2.

“We didn’t manage to pick up much, if any, traction in the Canadian dollar,” Noel Hebert, chief investment officer at Bethlehem, Pennsylvania-based Concannon Wealth Management LLC, which oversees about $250 million, said in a telephone interview. “The big macroeconomic drivers certainly felt like they faded, pulling crude and the Canadian dollar lower.”

The loonie, as the currency is known for the aquatic bird on the C$1 coin, fell 0.3 percent to 99.69 cents per U.S. dollar in Toronto. One Canadian dollar buys $1.0031. The currency touched 99.94 cents, the least since Aug. 7.

Futures traders decreased their bets that the Canadian dollar will gain, figures from the Washington-based Commodity Futures Trading Commission show. The difference in the number of wagers by hedge funds and other large speculators on an advance in the Canadian dollar compared with those on a drop -- so-called net longs -- was 89,088 on Oct. 23, compared with net longs of 93,750 a week earlier.

Employment Markets

Canadian government bonds were little changed, with the yield on the benchmark 10-year bond end the week at 1.83 percent. The price of the 2.75 percent notes maturing in June 2022 rose 7 cents to C$108.02.

Bank of Canada policy makers this week kept their benchmark rate at 1 percent, where it’s been more than two years. Carney had suggested in an Oct. 15 speech that the central bank’s quarterly monetary report that the economic forecast would reflect a slow global recovery. He strengthened the case for a gradual reduction of stimulus on Oct. 23.

Canadian unemployment was unchanged in October, according to median forecast of economists surveyed by Bloomberg. In September, employment rose more than five times faster than economists predicted. The jobless rate rose to 7.4 percent from 7.3 percent as the labor force grew by 72,600, Statistics Canada said Oct. 5. The job gain exceeded all 24 forecasts in a Bloomberg economist survey with a median of 10,000.

‘Macro Concerns’

“The bank isn’t going to be moving rates anytime soon,” John Curran, a senior vice president at CanadianForex Ltd., an online foreign-exchange dealer, said in a phone interview from Toronto. “I don’t know why people are getting so excited about that. It should be clear to most people, but global macro concerns should be forefront on peoples’ minds.”

Gross domestic product, the value of all goods and services produced in the U.S., rose at a 2 percent annual rate in the third quarter after climbing 1.3 percent in the prior quarter, Commerce Department figures showed yesterday. The median forecast of 86 economists surveyed by Bloomberg called for a 1.8 percent gain.

“A stronger U.S. GDP release is positive for Canada; however the slew of disappointing earnings and forecasts have weighed heavily on the Canadian dollar,” Camilla Sutton, head of currency strategy at Bank of Nova Scotia in Toronto, said in an e-mail. “The most important upcoming risks for Canada’s dollar are the U.S. election and nonfarm payrolls. A surprise in either could be the catalyst that breaks currencies, particularly the euro, out of recent ranges.”

Crude Oil

U.S. employers probably added about 125,000 jobs in October, and the unemployment rate is likely to have climbed to 7.9 percent, the last major economic data before the presidential election on Nov. 6. Per-share profits declined 0.4 percent and sales fell 1.9 percent for the 273 companies in the S&P 500 that reported results so far as the index headed for the first simultaneous decline in revenue and income since 2009.

Crude oil for December delivery fell 4.2 percent to settle this week at $86.24 a barrel on the New York Mercantile Exchange. Prices are down 13 percent this year.

“You’ll see the Canadian dollar remain at subdued levels in this backdrop,” Curran said.

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