Canada’s dollar strengthened against its U.S. peer, ending a five-day losing streak, after manufacturers’ prices rose for the first time since April as Hurricane Sandy slammed into the Eastern U.S.
The currency, which traded below parity yesterday for the first time in more than two months, strengthened as U.S. stock and bond markets remained closed for a second day due to the storm’s arrival. Trading is scheduled to reopen tomorrow. Canada’s dollar gained along with global stocks and oil on increased appetite for risk.
“With the U.S. market closed, attention shifts back to Europe, global growth and headline risk,” Mazen Issa, Canada macro strategist at Toronto-Dominion Bank’s TD Securities, said in a phone interview from Toronto. “Looking at markets overseas will have a moderate effect on the Canadian dollar, which is why we’re up slightly.”
The loonie, as the currency is nicknamed for the waterfowl on the C$1 coin, rose 0.2 percent to 99.92 per U.S. dollar cents at 5 p.m. in Toronto. It closed weaker than that level yesterday for the first time since Aug. 6. The currency is down 1.6 percent this month. One Canadian dollar buys $1.0008.
The Stoxx Europe 600 Index advanced 0.9 percent while crude oil, Canada’s largest export, rose 0.2 percent to $85.69 per barrel in New York.
The industrial product price index of finished-goods prices rose 0.5 percent in September, the fastest in a year, Statistics Canada said today from Ottawa. Economists predicted a 0.2 percent increase, according to the median estimate in a Bloomberg survey with 12 responses.
Bank of Canada Governor Mark Carney, testifying to the House of Commons Finance Committee in Ottawa, said the country’s labor market still has slack and there are mixed signals in housing. He reiterated that the greatest threats to the national economy are external.
The central bank last week whipped markets between positive and negative growth sentiment as Carney said the need for higher interest rates has become “less imminent” a day after strengthening the case for tightening monetary policy.
The Canadian dollar may weaken further in the short-term, Camilla Sutton, head of currency strategy at Bank of Nova Scotia in Toronto, said in a note to clients. It’s caused by a downward shift in near-term drivers of the currency, including weaker-than-forecast global earnings weighing on growth sentiment, Canada’s decision yesterday to cut the 2013 growth outlook to 2 percent, and the negative economic impact of Hurricane Sandy in the U.S.
After closing past both the 100-day and 200-day moving averages this week, the loonie may test C$1.0232, its July 25 low, Sutton said. The Canadian dollar should strengthen once the early November risk of elections have passed.
“We have made no change to our medium-term bullish Canadian dollar view,” she said.
Canadian bonds were little changed, with the yield on the 10-year benchmark note at 1.81 percent. The 2.75 percent note fell 2 cents to C$108.24.
Investors should reduce holdings of fixed-income securities with yields probably having reached bottom and equities set to rally as growth in North America recovers, according to BlackRock Inc.
The largest money manager in the world foresees a shift back to a 40 percent fixed-income and 60 percent equity allocation by individual investors, in line with historical averages, reversing record bond inflows this year as a recovery in North America triggers a revival in stock markets.
The loonie has gained 0.3 percent this year against nine developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The greenback has dropped 2.1 percent, among the top three decliners with the yen and euro.