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Canada Dollar Rises Against Commodity Peers as Outlooks Diverge

The Canadian dollar rose to its highest point in almost three years versus its Australian counterpart as traders speculated the North American economy will lead global growth.

Canada’s currency fluctuated against the U.S. dollar as oil dropped as much as 1.8 percent before a report forecast to show stockpiles fell last week in the U.S., the largest customer of Canadian crude. Canada posted its biggest jobs gain in a decade and the fastest pace of new home construction in 13-months in May, while stronger U.S. data has sent bond yields higher. The loonie gained versus the Aussie after Australia home-loan approvals grew at the slowest pace in three months.

“The domestic data backdrop in Canada, when you compare and contrast that to Australia, is very marked,” Jeremy Stretch, head of currency strategy at Canadian Imperial Bank of Commerce, said by phone from London. “The monetary-policy direction is remaining much more favorable to Canada than Australia, and to a lesser extent New Zealand.”

The loonie, as the Canadian dollar is nicknamed, gained 0.4 percent to 96.06 Canadian cents per Aussie 5 p.m in Toronto after touching 95.47, its strongest point since Sept. 2010. It rose 0.4 percent versus the dollar of New Zealand, like Australia a commodities exporter.

The Canadian dollar rose 0.1 percent to C$1.0189 per U.S. dollar after declining as much as 0.6 percent. One loonie buys 98.15 U.S. cents.

Canada’s benchmark 10-year government bonds rose, with yields falling three basis points, or 0.03 percentage point, to 2.18 percent. The 1.5 percent security maturing in June 2023 rose 23 cents to C$94.00.

Oil, Stocks

Crude-oil fell 0.9 percent to $94.87 a barrel in New York and the Standard & Poor’s GSCI index of 24 commodities dropped 0.5 percent. The S&P 500 Index of stocks declined 1 percent.

Crude stockpiles dropped 1.5 million barrels, or 0.4 percent, to 389.8 million in the week ended June 7, based on the median of 11 analyst estimates before an Energy Information Administration report tomorrow. Six respondents forecast a decrease and five a gain. Inventories surged to 397.6 million on May 24, the most since 1931.

“The Canadian dollar remains a high-beta currency, and fluctuations in the oil price will always affect it more,” said Eimear Daly, a currency market analyst at Monex Europe Ltd., by phone from London.

The Aussie fell against the majority of its most-traded peers as home-loan approvals rose 0.8 percent in April from the month before, versus a 2 percent rise forecast in a survey by Bloomberg News. The drop boosted the case for the Reserve Bank of Australia to cut borrowing costs, which tend to debase a currency. Australia’s key rate was trimmed one-quarter point in April to 2.75 percent.

Employment, Housing

“Things in North America are a little bit better than elsewhere,” Greg T. Moore, a currency strategist at Toronto-Dominion Bank, said by phone from Toronto. “A stronger economic recovery taking hold in the U.S. is good for the Canadian economy,”

Canadian employment rose by 95,000 last month, the most since August 2002, and the jobless rate fell to 7.1 percent from 7.2 percent even as more people joined the workforce, Statistics Canada said in Ottawa on June 7. The same day, the U.S. reported a high-than-forecast gain of 175,000 jobs.

Housing starts in Canada rose to 200,178 units at a seasonally adjusted annual pace in May, up 13.8 percent from April and the highest level since November.

The loonie climbed on June 6 most in more than a year after Bank of Canada Governor Stephen Poloz, in his first public comments, reiterated his predecessor Mark Carney’s view that rates will rise as the economy grows. Poloz will probably maintain a 1 percent interest rate for at least the rest of the year, according to economists surveyed by Bloomberg News.

Canada’s currency has gained 1.2 percent in the past three months against nine developed nation currencies tracked by the Bloomberg Correlation-Weighted Index. The greenback added 0.5 percent. The Aussie dollar led decliners, dropping 9.1 percent, followed by the New Zealand dollar’s 4.9 percent drop.

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