The Canadian dollar gained from a one-year low against its U.S. counterpart amid speculation the Federal Reserve may not taper its monetary stimulus, known as quantitative easing, as soon as some investors anticipated.
The currency climbed against the majority of its 16 most-traded peers as oil, the nation’s largest export, erased an earlier drop. The so-called loonie extended the advance after Statistics Canada said the number of Canadians receiving jobless benefits fell 1 percent in March from the previous month. Fed Chairman Ben S. Bernanke told lawmakers yesterday a premature withdrawal of stimulus could endanger economic recovery in Canada’s biggest trading partner.
“All markets are very sensitive to any shift in Fed policy, and even the slightest of possible easing can send the market into a tizzy, as it did yesterday,” Sal Guatieri, an economist at the Bank of Montreal, said in a phone interview. “The market has realized that it overreacted to Fed commentary when the Fed is in no hurry to tighten or even slow policy, and that is why we are seeing the Canadian dollar turn around.”
The loonie, as the Canadian dollar is known for the image of the aquatic bird on the C$1 coin, rose 0.6 percent to C$1.0305 per U.S. dollar at 5 p.m. in Toronto after touching C$1.0394, weakest since June 5, 2012. One loonie buys 97.03 U.S. cents.
Futures for crude oil added 0.1 percent to $94.40 a barrel in New York after falling as much as 2.2 percent. Standard & Poor’s 500 Index of stocks dropped 0.3 percent.
“The feeling is that perhaps tapering or easing off of QE is not quite as imminent as what we were expecting yesterday,” Neil Jones, head of European hedge fund sales at Mizuho Corporate Bank Ltd. in London, said in a telephone interview. “The pound has appreciated, so has the euro, likewise Canada and the Aussie are having a bit of revival.”
The loonie fell 1 percent yesterday as Bernanke testified in Washington that, as the outlook for the labor market “improves in a real and sustainable way, the committee will reduce the flow of purchases.”
The U.S. central bank is buying $85 billion of government and mortgage debt each month to cap borrowing costs and help the economy. Minutes of the Fed’s April 30-May 1 policy meeting released yesterday showed that a “number” of officials were willing to taper bond buying as early as the next meeting in June should economic reports show evidence of sustained growth.
Canadian Finance Minister Jim Flaherty, speaking in Ottawa yesterday, said the loosening of fiscal and monetary policies in some countries may be increasing risks to the global economy.
Some policy makers favor “growth at any cost,” Flaherty told a committee of lawmakers. Those authorities believe “not only should they be doing more in fiscal policy, but they should continue what some of them are doing in monetary policy, printing money.”
The number of regular beneficiaries of Canadian jobless benefits declined by 5,220 to 523,700. From the year-ago month, the total number of beneficiaries fell 8.1 percent, or by 46,390, the Ottawa-based agency said.
The Canadian dollar is exhibiting some technical signs of being oversold versus the U.S dollar, even as a strong U.S currency trend is in place, George Davis, chief technical analyst for fixed income and currency strategy in Toronto at Royal Bank of Canada, wrote in a note to clients.
“This suggests a more cautious stance as the prospects of a short-term corrective pullback are increasing,” he wrote.
The Canadian dollar has fallen 0.6 percent this week, the most after the pound among 10 developed-market currencies tracked by Bloomberg Correlation-Weighted Indexes. The dollar dropped 0.4 percent, the euro advanced 0.4 percent and the yen added 1 percent.