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Canadian Dollar Gains Versus Majors on China Factories

The Canadian Dollar weakened against the majority of its 16 most-traded peers after factory sales fell more than economists forecast and industrial production in the U.S. rose by the most in two years.

The currency fell against its U.S. peer after Statistics Canada said factory manufacturing sales declined 1.4 percent to C$40.8 billion ($49.6 billion) in October, the biggest decline since January. The Canadian dollar remained higher for a second consecutive week.

“The numbers this morning out of Canada certainly haven’t helped the loonie bulls,” said Dean Popplewell, head analyst at the online currency-trading firm Oanda Corp., by phone from Toronto. “To a certain extent, the loonie was overvalued somewhat this week on the back of M&A activity.”

The Canadian dollar, called the loonie for the image of the aquatic bird on the C$1 coin, declined 0.1 percent to 98.55 cents per U.S. dollar at 5 p.m. in Toronto. One Canadian dollar buys $1.0147. The currency has gained 0.3 percent this week.

Canada’s longer-maturity government bonds rose, with yields on the benchmark 10-year security falling one basis point, or 0.01 percentage point, to 1.79 percent. The 2.75 percent security due in June 2022 was rose 8 cents to C$108.33.

Crude oil, Canada’s biggest export, rose 1.1 percent to $86.87 a barrel in New York, and the Standard & Poor’s 500 Index of stocks dropped 0.4 percent.

Loonie Bets

Futures traders increased their bets that the Canadian dollar will gain against the U.S. dollar, 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 62,533 on Dec. 11, compared with net longs of 57,071 a week earlier.

Economists forecast a 0.1 percent decrease in Canadian factory sales, according to the median of a Bloomberg survey.

The dollar reached a seven-week high versus its U.S. counterpart on Dec. 10 after the Canadian government approved China-backed Cnooc Ltd.’s $15.1 billion acquisition of Nexen Inc.

Output at U.S. factories, mines and utilities increased 1.1 percent last month after a revised 0.7 percent drop in October, the Federal Reserve reported. Economists forecast a 0.3 percent advance, according to the Bloomberg survey median. The U.S. is Canada’s biggest trading partner.

‘Greater Confidence’

“What’s driving the CAD/USD is more likely greater confidence in U.S. activity versus any sort of concern with Canada,” David Doyle, a strategist at Macquarie Capital Markets, said by phone from Toronto.

Further gains in U.S. manufacturing, which has stumbled in the second half of the year, would help build on the recent pickup in housing and sustained consumer spending. At the same time, the industry faces the hurdles of slower global economies and a lack of clarity on the U.S. budget that has prompted companies to hold back on investment.

“The U.S. fiscal cliff is a bit of an overhang on why Canada is going to have a hard time going much stronger until that’s resolved,” Shane Enright, executive director at Canadian Imperial Bank of Commerce’s CIBC World Market’s unit, said by phone from Toronto.

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