Canada Dollar Gains for Fifth Week on Global Growth Optimism
Canada’s dollar rallied, pushing the value above that of its U.S. counterpart for the first time in three months, on speculation global growth will sustain demand for natural resources such as oil, the nation’s biggest export.
The currency gained for a fifth week versus the greenback, the longest winning streak since October 2010, even after a report showed yesterday that Canada’s economy unexpectedly lost jobs in July. Bank of Canada Governor Mark Carney said two days ago that the nation is in a “very different place” than economies such as the U.K.’s that are in crisis, and may require higher interest rates. Factory sales increased in June, a government report is forecast to report on Aug. 16.
“The main driver by far of the Canadian dollar is global risk appetite,” Steven Englander, head of Group-of-10 currency strategy in New York at Citigroup Inc., said in a telephone interview yesterday. “As long as that is switched on, Canada looks good.”
Canada’s currency, nicknamed the loonie for the waterfowl on the one-dollar coin, strengthened 1 percent this week to 99.11 cents per U.S. dollar. One Canadian dollar buys $1.009. It was the first weekly close for the loonie beyond parity since the five days ended May 4.
Futures traders increased bets that the Canadian dollar will gain against the greenback for a second consecutive week, according to figures from the Washington-based Commodity Futures Trading Commission released yesterday.
The difference in the number of wagers by hedge funds and other large speculators on an advance in the Canadian dollar compared with those on a drop, known as net longs, was 19,122 contracts as of Aug. 7.
Government bonds were little changed this week, with the yield on the benchmark 10-year note rising about one basis point, or 0.01 percentage point, to 1.78 percent. The 2.75 percent securities maturing in June 2022 dropped 15 cents to C$108.68.
The government will auction C$3.4 billion ($3.43 billion) in five-year notes Aug. 15. The securities carry a 1.5 percent coupon and mature in September 2017.
The currency was little changed yesterday after Statistics Canada said the economy lost 30,400 jobs. While the decline was the most since October 2011, all were part-time positions.
The jobless rate rose to 7.3 percent. Economists projected the unemployment rate would remain unchanged at 7.2 percent and that employment would increase by 6,000, according to the median in a Bloomberg News survey of 25 economists.
“Some disappointing numbers directly from Canada does help to reduce some of the reasons to be long the Canadian dollar,” David Mann, regional head of research for the Americas at Standard Chartered in New York, said in a telephone interview. “If you look at the Canadian dollar in the context of where we’ve been going since June, it’s had a pretty decent appreciation.”
The loonie rose 1.3 percent in the past month against nine major counterparts, according to the Bloomberg Correlation- Weighted Indexes. It has gained 3 percent this year, while the U.S. dollar lost 0.4 percent.
Canada’s dollar will end the year at C$1.02 per U.S. dollar, according to median estimate of 38 forecasters surveyed by Bloomberg News.
The Bank of Canada will raise its 1 percent overnight target rate by a quarter-percentage point by the second quarter of 2013, according to the weighted forecast in a Bloomberg survey of 21 economists.
Oil for September delivery fell 49 cents to settle at $92.87 a barrel on the New York Mercantile Exchange yesterday. The decline trimmed a weekly advance to 1.6 percent. It was the fourth gain in five weeks.
The country’s manufacturing sales grew 0.3 percent in June from the previous month, according to the median estimate of economists surveyed by Bloomberg. Sales fell 0.4 percent in May. Statistics Canada is scheduled to release data on monthly manufacturing sales Aug. 16.
“In general, those anchored to the U.S. should still do well in this world,” Alan Ruskin, global head of Group-of-10 foreign-exchange strategy at Deutsche Bank AG in New York, said of the Canadian dollar in a phone interview yesterday.
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