Futures traders reduced bets that the Canadian dollar will decline against its U.S. counterpart by the most on record amid speculation China will add monetary stimulus, boosting demand for raw materials and energy.
Speculators cut wagers on Canada’s dollar weakening against the greenback, known as net shorts, by 36,590 positions as of March 25 from a week earlier, the most in records going back to 1993, figures from the Washington-based Commodity Futures Trading Commission show. The shift reduced short positions to 33,215 contracts, from 69,805 on March 21.
“The market is gearing up for a more stimulative Chinese policy, which would feed into a bid for commodities as well as the related currencies Australian dollar and Canadian dollar,” said Jack Spitz, managing director of foreign exchange in Toronto at National Bank of Canada.
The Canadian dollar, nicknamed the loonie for the image of the aquatic bird on the C$1 coin, declined 0.3 percent to C$1.1061 in Toronto trading after gaining earlier to C$1.1001, the strongest level since March 7. It climbed 1.5 percent for the week, the most since July, snapping three weeks of losses.
The Aussie dollar gained 1.8 percent this week, the most since the five days ended Feb. 7, to 92.47 U.S. cents. It touched 92.95 cents today, the highest since Nov. 21.
Chinese Premier Li Keqiang said he’s confident of keeping his nation’s growth in a “reasonable range.” The country’s manufacturing industry weakened for a fifth straight month, according to a preliminary measure for March released March 24.
An equally weighted basket of the so-called dollar-bloc currencies -- those of Australia, New Zealand and Canada, all commodity producers -- rallied to 102.61, the highest level since Oct. 22, against the yen and the dollar.
Reserve Bank of Australia Governor Glenn Stevens said March 26 there are encouraging early signs in the country of a handover from mining-led growth to domestic consumption and the economy may strengthen later this year.
The loonie has been the worst performer this year among the greenback’s 16 major peers since the Bank of Canada said in January the risks of falling inflation had increased, prompting bets it would cut borrowing costs. The Canadian currency dropped 4 percent against the dollar.
“The Australian-dollar bid is complemented by the upbeat outlook from the RBA,” Spitz said. “The Canada-dollar bid comes despite dovish guidance from the BOC.”