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Canadian Currency Strengthens Most in Three Months Against Euro

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Feb. 14 (Bloomberg) -- The Canadian dollar gained the most versus the euro in three months after a report showed the recession in the 17-nation currency area deepened more than forecast last quarter, sapping demand for European assets.

The currency traded in the tightest range against the U.S. dollar in two months, briefly strengthening to parity for the first time this week. Jobless-benefit claims in the U.S., Canada’s biggest trade partner, fell last week more than forecast, a report showed, and crude oil, the nation’s biggest export, rose.

“The Canadian dollar has done fairly well, especially against the euro,” Blake Jespersen, managing director of foreign exchange at Bank of Montreal, said by telephone from Toronto. “Generally speaking, people are somewhat optimistic about global growth this year, especially in some of the emerging-market and commodity economies, so you’re seeing a boost from that.”

Canada’s currency, nicknamed the loonie for the image of the aquatic bird on the C$1 coin, gained 0.1 percent against the greenback to C$1.0009 at 5 p.m. in Toronto. It traded between C$1 and C$1.0024, the narrowest range since Dec. 11. One Canadian dollar purchases 99.91 U.S. cents.

The loonie gained as much as 1.1 percent versus the euro, its biggest intraday increase since Nov. 2, before trading at C$1.3376, up 0.8 percent.

Bonds Gain

Canadian government bonds rose for the first time in four days, sending yields on benchmark 10-year debt down four basis points, or 0.04 percentage point, to 2 percent. The price of the 2.75 percent securities maturing in June 2022 increased 35 cents to C$106.35.

The Bank of Canada will auction C$400 million ($400 million) of real-return bonds on Feb. 20. The inflation-linked debt matures in December 2044. At its last RRB auction on Dec. 5, the BOC sold C$700 million of 30-year bonds at a median yield of 0.3 percent. The bid-to-cover ratio was 2.59 times, compared with 3.04 times at the Sept. 12 auction.

The loonie gained versus Europe’s shared currency before a two-day meeting of Group-of-20 finance ministers and central bankers starts tomorrow in Moscow. The group will say it recognizes global economic growth is still weak, that stronger economic and monetary union is needed in the euro area and Japan and the U.S. need to resolve fiscal uncertainties, according to a draft of a statement prepared for the meeting.

The Canadian currency advanced versus the greenback after U.S. Labor Department data showed jobless claims fell by 27,000 to 341,000 in the week ended Feb. 9, fewer than any projection in a Bloomberg survey in which the median forecast was 360,000.

‘Better Demand’

“Improvement in the U.S. labor force will mean better demand for Canadian exports,” Adam Button, a currency analyst at Forexlive.com in Montreal, said in a telephone interview.

Futures on crude oil increased 0.3 percent to $97.32 a barrel in New York. Western Canada Select, the benchmark for oil-sands bitumen, closed at a discount of $23.50 to U.S. West Texas Intermediate price, the least since Oct. 24.

The European Union’s statistics office said gross domestic product in the euro region fell 0.6 percent from the previous three months. That was the worst performance since the first quarter of 2009, and exceeded the median forecast of a 0.4 percent decline from economists in a Bloomberg News Survey.

Canada’s dollar has fallen 0.6 percent this year among the 10 developed-nation currencies tracked by the Bloomberg Correlation-Weighted Indexes. The U.S. dollar has risen 0.4 percent, and the euro has gained 1.8 percent.

To contact the reporters on this story: Taylor Tepper in New York at ttepper2@bloomberg.net; Joseph Ciolli in New York at jciolli@bloomberg.net

To contact the editor responsible for this story: Dave Liedtka at dliedtka@bloomberg.net