May 27 (Bloomberg) -- The Canadian dollar weakened against a majority of its most-traded counterparts as crude oil declined before Mark Carney’s last policy meeting as Bank of Canada governor.
The Canadian dollar fell the most against the Mexican peso and the Korean won. Carney is expected to make few changes to monetary policy at the May 29 meeting; all 22 economists surveyed by Bloomberg predict the outgoing governor to leave the benchmark interest rate at one percent before his successor Stephen Poloz takes over June 3.
Economists in a separate survey project a May 31 report will show Canada’s gross domestic product quickened in the first quarter. Futures on crude oil, Canada’s largest export, slid as much as 1 percent today in New York, extending a 2 percent drop last week as the Canadian dollar fell to the lowest in almost a year.
“Generally speaking it has been trading with a weaker bias so that’s something that may be sustained throughout the year,” said Mazen Issa, Canada macro strategist at Toronto-Dominion Bank’s TD Securities unit, by phone from Toronto. “With respect to the Bank of Canada, it’s the final hurrah for Mark Carney. The general sense going into that meeting at least from the market’s perspective is that you’re really not going to expect much from that meeting.”
The loonie, as the Canadian dollar is nicknamed, dropped against 12 of 16 majors. It fell 0.2 percent to C$1.0341 per U.S. dollar at 5 p.m. in Toronto. The currency touched C$1.0394 May 23, the lowest since June. One loonie buys 96.70 U.S. cents.
Canada’s benchmark 10-year government bonds fell, pushing yields higher by three basis points, or 0.03 percentage point, to 1.98 percent. The 1.5 percent security maturing in June 2023 fell 27 cents to C$95.70.
The Standard & Poor’s 500 Index was closed for a U.S. holiday.
Canada’s economy expanded 2.3 percent in the first quarter, compared to 0.6 percent the previous period, Statistics Canada will probably say at the end of this week, according to the median forecast of 23 economists in a Bloomberg News survey.
The Bank of Canada lowered its first quarter growth projection to 1.5 percent from 2.3 percent in its April monetary policy report as Carney told reporters, “considerable monetary policy stimulus currently in place will likely remain appropriate for a period of time.”
“This market is positioned fairly well short of the Canadian dollar,” said Matthew Perrier, director of foreign exchange at Bank of Montreal, by phone from Toronto. “I don’t think we’ll see much change out of the Bank of Canada, so the real surprise would be a stronger print out of Friday’s GDP.”
The cost to insure against declines in the Canadian dollar versus its U.S. counterpart rose from its lowest point in a week. The three-month 25-delta rate reached as high as 1.58 percentage points today, from 1.50 percent on May 24.
The Canadian dollar has risen 0.5 percent this year against nine developed nation currencies tracked by the Bloomberg Correlation Weighted Indexes. The Australian dollar has fallen 3.3 percent while the U.S. dollar has gained the most at 5.2 percent.
“Wait for a little more clarity,” from the Bank of Canada, said Don Mikolich, executive director of foreign exchange sales at Canadian Imperial Bank of Commerce, by phone from Toronto. “People will be waiting for what Poloz will say when he gets in.”
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