Canada’s dollar fluctuated against its U.S. counterpart, trading below parity for a second day, as concern Europe and the U.S. will fail to contain their fiscal crises eroded appetite for higher-returning assets.
The Canadian currency touched a three-month low before erasing losses after consumer confidence in the U.S., the nation’s biggest trade partner, rose to a five-year high. Investors have sought refuge in the greenback this week as policy makers in Europe decide on rescue aid to Greece this month and U.S. lawmakers risk pushing the world’s largest into recession in a budget-deficit showdown called the fiscal cliff.
“There are still fundamental event risks at play,” Mazen Issa, Canada macro strategist at Toronto-Dominion Bank’s TD Securities in Toronto, said in a phone interview. “The market isn’t in a position to make any large bets on the Canadian dollar. Canada is being held hostage by the fiscal cliff issue.”
The Canadian currency, called the loonie for the image of the aquatic bird on the C$1 coin, declined 0.1 percent to C$1.0016 per U.S. dollar at 5 p.m. in Toronto. It depreciated 0.3 percent earlier to C$1.0033, the weakest level since Aug. 3. One Canadian dollar buys 99.84 U.S. cents.
Canadian government bonds were little changed after paring earlier gains. The 10-year benchmark bond yielded 1.72 percent after falling earlier to 1.68 percent, also the lowest since Aug. 3. The price of the 2.75 percent note maturing in June 2022 slipped 3 cents to C$109.09.
Crude oil for December delivery fell as much as 1.1 percent to $84.13 a barrel in New York before gaining 1.2 percent to $86.10 after the Thomson Reuters/University of Michigan preliminary U.S. consumer sentiment index climbed to 84.9, the highest level since July 2007. It was up from 82.6 in October. A Bloomberg survey forecast a preliminary reading of 82.9 for November.
The Standard & Poor’s 500 Index rose 0.2 percent after dropping earlier as much as 0.3 percent.
The loonie has climbed 1 percent this year against nine developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The U.S. dollar has dropped 1.2 percent, and the yen slid 4.8 percent.
The greenback gained yesterday versus most major peers, including the loonie, after a European Union official said euro-area finance ministers may not make a decision on unlocking a 31.5 billion-euro ($40 billion) installment of rescue funds for Greece until late this month.
Investors have also sought refuge this week since the re-election of President Barack Obama and a split Congress spurred concern lawmakers will be unable to compromise on the budget.
The U.S. faces $1.2 trillion in mandated spending cuts and tax increases starting Jan. 1 if Congress can’t agree to reduce the deficit, which totaled $1.09 trillion in fiscal 2012. The Congressional Budget Office has said the U.S. economy would slow by as much as 0.5 percent next year if Congress fails to prevent the measures from kicking in.