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Canadian Dollar Falls to Lowest Since 2011 as CPI, Retail Slow

The Canadian dollar fell to an almost two-year low after the nation’s inflation rate in May accelerated at a slower rate than economists forecast and retail sales for April rose less than projected.

The currency registered its biggest weekly decline since September 2011 as the consumer price index gained 0.7 percent in May from a year ago, following a 0.4 percent April gain that was the slowest since October 2009, while retail sales added 0.1 percent, Statistics Canada said from Ottawa. The currency dropped versus the majority of its most-traded counterparts as crude oil, the country’s biggest export, erased earlier gains.

“We outperformed risk assets yesterday, so it probably left us vulnerable to a weak number today,” David Watt, Toronto-based chief economist at the Canadian unit of HSBC Holdings Plc, said by phone. “We’re in this environment of modest struggling growth, and retail sales are reflecting that.”

The loonie, as the Canadian dollar is known, fell 0.7 percent to C$1.0457 per U.S. dollar at 5 p.m. in Toronto. It touched C$1.0489, the weakest level since Nov. 25, 2011. One loonie buys 95.63 U.S. cents.

The currency has declined six straight days and dropped 2.8 percent this week, the steepest fall since a 5.1 percent tumble in the five days ending Sept. 23, 2011.

Oil, Bonds

Crude-oil futures fell 1.6 percent to $93.92 per barrel in New York. The Standard & Poor’s 500 Index of stocks gained 0.3 percent.

Canadian government bonds fell, pushing 10-year note yields up 12 basis points, or 0.12 percentage point, to 2.45 percent, the highest level since October 2011. The yield has risen 78 basis points since May 2 after the U.S. Federal Reserve said it was prepared to taper four years of extraordinary stimulus measures that pushed yields to record lows as economic conditions evolve.

Canada’s core inflation rate, which excludes eight volatile products, advanced at a 1.1 percent pace for a second month. Economists surveyed by Bloomberg forecast that total inflation would be 0.9 percent and the core rate would be 1.2 percent.

In a separate report, Statistics Canada said that retail sales rose in April to C$39.5 billion ($38.1 billion). Economists forecast a 0.2 percent gain in a Bloomberg survey with 23 responses.

‘Unimpressive’ Sales

“Retail sales were unimpressive,” Adrian Miller, director of fixed-income strategies at GMP Securities LLC in New York, said in an e-mail. “I see nothing in the recent Canadian data that suggests anything other than sub-2 percent growth in 2013 as support from business investments and consumer spending fail to materialize as some have predicted or hoped.”

Canada’s growth is slowing as the consumers who led it out of recession pare spending and exporters facing a shaky global economy look increasingly unlikely to offset the decline.

The median forecast of economists surveyed by Bloomberg calls for growth to slow to 1.7 percent this year before accelerating to 2.4 percent in 2014 and 2.75 percent in 2015.

Canadian Imperial Bank of Commerce’s CIBC World Markets lowered its forecast for the Canadian dollar to C$1.05 by the fourth quarter from C$1.03 previously.

“Slower growth in China makes us less constructive on commodity currencies,” CIBC economist Andrew Grantham said in a note to clients. The Canadian dollar will fare better than its Australian counterpart because it is less dependent on China, he said.

The loonie will end the year at C$1.03 according to the median forecast of 59 economists in a Bloomberg survey, up from C$1.02 at the end of May.

The Canadian dollar has fallen 1.3 percent over the past month against nine developed nation currencies tracked by the Bloomberg Correlation Weighted Index. It trails only the currencies of fellow commodities exporters Australia, New Zealand and Norway, down 5.9 percent, 4.9 percent and 4.1 percent. The U.S. dollar gained 0.8 percent.

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