Canadian Dollar Declines From 8-Week High on Boehner

Canada’s dollar weakened from an eight-week high against its U.S. peer after U.S. House Speaker John Boehner said President Barack Obama was willing to let the economy go over the so-called fiscal cliff and into recession.

The Canadian currency declined for the first time in eight days as the nation’s household debt ratio rose to a record high compared with disposable income in the third quarter. The currency gained earlier as unemployment claims in the U.S., Canada’s largest trading partner, fell to a nine-week low and retail sales rose.

“Boehner’s negative comments today are working against the Canadian dollar and risk sentiment more generally,” Mazen Issa, Canada macro strategist at Toronto-Dominion Bank’s TD Securities, said by phone from Toronto. “It’s really shifting our focus back to the immediate issue at hand, which is the fiscal cliff.”

The Canadian dollar, known as the loonie for the image of the aquatic bird on the C$1 coin, fell 0.1 percent to 98.49 cents per U.S. dollar at 5 p.m. in Toronto after touching 98.25, the strongest since Oct. 18. The seven-day streak of gains was the longest for the loonie since the nine days ended Jan. 3, 2011. One Canadian dollar buys $1.0153.

Canada’s government bonds fell, with yields on the benchmark 10-year security rising four basis points, or 0.04 percentage point, to 1.80 percent. The 2.75 percent security due in June 2022 declined 37 cents to C$108.26.

Crude oil, Canada’s biggest export, fell 1 percent to $85.89 a barrel in New York, and the Standard & Poor’s 500 Index of stocks dropped 0.6 percent.

‘Not Serious’

Boehner, an Ohio Republican, repeated his insistence that Obama’s budget proposal is “anything but” balanced and accused the president of being “not serious” about cutting spending.

House Minority Leader Nancy Pelosi, a California Democrat, said today that talk of deeper spending cuts demanded by Republicans should await discussions on a tax overhaul next year.

Lawmakers are trying to avert more than $600 billion in tax increases and federal spending cuts scheduled to take effect in January 2013 that threatens to drag the U.S. economy over a fiscal cliff.

“They’re going to be going over the fiscal cliff -- it’s almost a certainty,” Aaron Fennell, a futures specialist at Bank of Nova Scotia’s ScotiaMcLeod unit, said by phone from Toronto. “The strategy the Democrats are using is that they’re going to cause the Bush tax cuts to expire and then feed the tax cuts back to the Republicans in exchange for spending concessions.”

Consumer Credit

Applications for jobless benefits in the U.S. fell by 29,000 to 343,000 in the week ended Dec. 8, the fewest since reaching a four-year low in the period ended Oct. 6, Labor Department figures showed today. The U.S. also posted a 0.3 percent rise in retail sales in November as car sales reached a four-year high.

The currency pared earlier gains as Canadians defied Bank of Canada Governor Mark Carney’s warnings that consumer credit was the biggest threat to the country’s economy. The ratio of credit-market debt such as mortgages rose to 164.6 percent from a 163.3 percent in the prior three-month period, Statistics Canada said in Ottawa.

Home Prices

The nation’s new-home price index rose for a 19th consecutive month in October, led by gains in Toronto and Montreal, according to a separate report. The 0.2 percent gain in new-home prices matched the previous two readings and the median forecast in a Bloomberg News survey with 10 responses. From a year earlier, new-home prices increased 2.4 percent in October.

The currency gained yesterday after the U.S. Federal Reserve announced it would add $45 billion in additional asset purchases a month to spur the economy, a move that could debase the currency.

“With the Fed yesterday, that should be small Canadian-dollar positive,” David Bradley, director of foreign-exchange trading at Scotia Capital Inc., a unit of Bank of Nova Scotia, said by phone from Toronto. “I think the Canadian dollar is going to gradually drift stronger as we head into the end of the year.”

Canada’s currency has gained 1.2 percent this year versus nine developed-nation peers tracked by Bloomberg Correlation-Weighted Indexes. The greenback has dropped 2.8 percent and the yen has been the biggest loser, tumbling 11 percent. New Zealand’s dollar leads gainers, up 6.4 percent.

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