Canadian Dollar Weakens as U.S. Budget Talks Hit Impasse
The Canadian dollar fell to its lowest level in almost a month as an impasse on U.S. budget negotiations renewed concern the showdown may push the nation’s biggest trading partner into recession next year.
The currency pared losses against its U.S. counterpart after Bloomberg News reported that U.S. Speaker John Boehner told fellow Republican lawmakers during a conference call that the U.S. House will convene on Dec. 30. Senate Majority Leader Harry Reid said earlier it looked like the U.S. was headed “over the cliff” and criticized the Republican-led House for not gathering with less than a week left to negotiate a budget deal to avoid $600 billion in automatic spending cuts and tax raises. Prices of natural resources and higher-yielding assets had dropped as investors became more risk adverse.
“That kind of knocked the sails out of any market risk appetite,” said Matthew Perrier, Toronto-based director of foreign exchange at Bank of Montreal (BMO) by phone. “Reid made his comments on the floor suggesting time was running out.”
The loonie, as the Canadian currency is known for the image of the aquatic bird on the C$1 coin, fell 0.09 percent to 99.52 cents per U.S. dollar at 5 p.m. in Toronto, after touching 99.59, the lowest since Nov. 28. One loonie buys $1.005. The Canadian dollar is up 2.6 percent this year versus its U.S. counterpart, erasing a 2.33 percent decline for 2011.
Crude oil, Canada’s biggest export, fluctuated after dropping as much as 1 percent to $90.05 per barrel and Standard & Poor’s 500 Index fell 0.1 percent.
Canada’s benchmark 10-year government bonds rose, with yields declining three basis points, or 0.03 percentage point, to 1.79 percent. The 2.75 percent security due in June 2022 gained 23 cents to C$108.26.
Democratic and Republican leaders of the U.S. House and Senate plan to meet with President Barack Obama, Senator Dick Durbin said today. Reid, Boehner, Senate Minority Leader Mitch McConnell and House Minority Leader Nancy Pelosi will join the President at the White House, he said.
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