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Canadian Dollar Advances on Decade-High Foreign Bond Buys

Dec. 17 (Bloomberg) -- The Canadian dollar gained against its U.S. counterpart for the first time in three days as foreign purchases of Canadian bonds reached a 10-year high.

Canada’s currency rose against the majority of its 16 most-traded peers as foreign buyers registered the fourth straight month of net investment in the nation’s debt. The currency advanced with oil and stocks as U.S. President Barack Obama and House Speaker John Boehner may be moving closer to a budget deal after meeting at the White House. The Canadian dollar strengthened to a 19-month high against the yen after Japan’s Liberal Democratic Party returned to power on calls for more monetary easing.

“We have moved from underperforming everybody, all the other primary currencies, to catching up to a lot of them,” Camilla Sutton, head of currency strategy at Bank of Nova Scotia, said by phone from Toronto. “Starting just before the release of international securities transactions, Canada started to strengthen, and then with the positive number strengthened even further.”

The loonie, as the Canadian currency is known for the image of the aquatic bird on the C$1 coin, increased 0.2 percent to 98.35 cents at 5 p.m. in Toronto. One Canadian dollar buys $1.0168. It has gained 1.1 percent this month and is little changed this quarter.

Canada’s dollar advanced 0.7 percent to 85.29 yen after earlier touching 85.62 yen, it’s highest since May 2011. It has climbed 2.8 percent this month to extend its advance this quarter to 7.6 percent.

Cliff Talks

Futures of crude oil, Canada’s biggest export, rose 0.9 percent to $87.47 a barrel in New York. The Standard & Poor’s 500 Index of U.S. stocks gained 1.2 percent.

Canada’s government bonds fell, with benchmark 10-year bonds yields rising four basis points, or 0.04 percentage point, to 1.83 percent. The 2.75 percent security due June 2022 fell 32 cents to C$108.01.

Obama is considering a possible budget concession on Social Security cost-of-living increases after Boehner dropped his opposition to raising tax rates for some top earners, said two people familiar with the talks.

The lawmakers are trying to avoid more than $600 billion in tax increases and spending cuts, the so-called fiscal cliff, that will start taking effect in January.

Bond Buying

The loonie erased earlier losses today against the U.S. dollar as Statistics Canada said in Ottawa that nonresidents bought a net C$13.3 billion ($13.4 billion) of Canadian securities in October. Nonresidents bought C$8.15 billion of Canadian government bonds and C$8.93 of private corporate debt, while divesting of C$2.97 billion of money-market paper, the agency said.

Advances in the loonie were tempered as existing home sales in fell 1.7 percent in November from the previous month, according to the Canadian Real Estate Association. Sales were down 11.9 percent from a year earlier.

The government tightened mortgage rules in July while the banking regulator introduced tougher standards on mortgage lenders in an attempt to prevent a housing bubble forming in some markets.

Canada’s currency rose against the yen as Japan’s LDP won 294 seats in the 480-member lower house, setting the stage for Shinzo Abe to become Prime Minister with economic policies that include “unlimited easing” by the Bank of Japan to reach a 2 percent inflation target and increased public-works spending.

“Unlimited easing is not going to be good” for the yen, said John Curran, senior vice president at Canadian Forex Ltd., an online foreign exchange dealer. “It should weaken the currency.”

Canada’s currency has gained 1 percent this year versus nine developed-nation peers tracked by Bloomberg Correlation-Weighted Indexes. The greenback has dropped 3.1 percent and the yen has been the biggest loser, tumbling 12 percent. New Zealand’s dollar leads gainers, up 6.3 percent.

To contact the reporters on this story: Ari Altstedter in Toronto at; John Detrixhe in New York at

To contact the editor responsible for this story: Dave Liedtka at

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