The Canadian dollar is trading this week in the narrowest range since March amid speculation whether U.S. budget deficit talks will remove the risk of recession in the nation’s biggest-trading partner.
The currency has traded between C$1.0057 and 99.85 cents per U.S. dollar since Nov. 12. The loonie, as the dollar is nicknamed for the image of the waterfowl on the C$1 coin, traded below parity with the greenback for a fourth day and is at the weakest level since August.
“There’s too much uncertainty to really know how things are going to cut one way or the other,” David Tulk, chief Canada macro strategist in Toronto at Toronto-Dominion Bank’s TD Securities unit, said in a phone interview. “There’s a natural gravitational bias toward the intuitive appeal of parity.”
The Canadian currency was little changed at C$1.0012 at 5 p.m. in Toronto. One Canadian dollar buys 99.88 U.S. cents.
U.S. President Barack Obama met today with lawmakers in Washington for talks to prevent tax increases and spending cuts from automatically coming into force early next year. The Congressional Budget Office has said that the combination may push the U.S. economy into recession, or over the so-called fiscal cliff next year.
House Speaker John Boehner said he offered a “framework” including new revenue to reduce the U.S. budget deficit in his first face-to-face talks with Obama and top Congress leaders since the Nov. 6 election.
“The focus is on the bigger themes of the week, including the fiscal cliff,” Greg Moore, currency strategist at Toronto-Dominion Bank, said in a note to clients. “The Canadian dollar and it’s commodity-currency peers have been immune to the forces that have seen equities under pressure, and that could continue to be the case until we see commodities make new lows as well.”
Canadian government bonds rose, with the yield on the benchmark 10-year security falling three basis points, or 0.03 percentage point, to 1.69 percent. The price of the 2.75 percent bond maturing in June 2022 rose 26 cents to C$109.27.
Foreign net purchases of Canadian securities almost doubled in September from the month before on government bond sales, the federal statistics agency said. Purchases totaled C$13.9 billion ($13.9 billion) in September and the estimated August purchase was increased to C$7.56 billion from an initial C$6.90 billion, Statistics Canada said today in Ottawa.
Total purchases included C$8.94 billion of government bonds and C$1.52 billion of money-market paper, the report said. Non-Canadians purchased a net C$3.29 billion of the country’s stocks, led by shares of financial companies.