Canadian Dollar Weakens Against Peers as Housing Slows
The Canadian dollar reached a 12-week high versus its U.S. counterpart as a surge in metal prices boosted commodities and renewed confidence in global growth.
The currency flirted with parity against the greenback after economic data from China and Germany suggested export demand was recovering. The Canadian currency had weakened earlier in the day following a report that showed new home construction slowed in April.
“Base metals have been on a run in the past few days; you get a move like that, it’s going to grab some attention,” David Watt, chief economist at HSBC Bank Canada in Toronto, said in a telephone interview. “You add it all up, and it builds momentum and overshadows the weaker housing data.”
The loonie, as the Canadian dollar is known for the image of the aquatic bird on the C$1 coin, gained 0.1 percent to C$1.0028 per U.S. dollar at 2:10 p.m. in Toronto. The currency, which last traded at parity in February, strengthened to as much as C$1.0018. One loonie buys 99.72 U.S. cents.
The Bank of Canada sold C$3.4 billion ($3.39 billion) of 1.25 percent bonds maturing in September 2018 at an average yield of 1.325 percent. The bid-to-cover ratio, which gauges demand by comparing total bids with the amount of securities offered, was 2.70.
Canada’s central bank is alone among Group of Seven nations with a tightening bias, meaning the next move on rates will likely be higher. The Bank of Canada has kept its benchmark overnight rate at 1 percent for almost three years.
Chinese export growth unexpectedly accelerated in April even as shipments to the U.S. and Europe fell. German industrial production also rose more than forecast, increasing for a second month in March in a further sign that Europe’s largest economy is returning to growth.
Copper, nickel and gold advanced more than 1 percent to help lead commodities higher.
Housing starts declined to 174,900 at a seasonally adjusted annual pace in April, Ottawa-based Canada Mortgage & Housing Corp. said on its website today. Economists forecast a reading of 175,000 according to the median of 25 responses to a Bloomberg News survey.
Futures on crude oil, Canada’s largest export, rose 1.1 percent to $96.67 per barrel and the Standard & Poor’s 500 Index of U.S. stocks rose 0.3 percent.
The loonie has gained 1.4 percent in the last month against nine other developed nation currencies tracked by the Bloomberg Correlation Weighted Index. The Australian dollar has fallen 2.6 percent while the U.S. dollar has lost 0.2 percent.
To contact the editor responsible for this story: Dave Liedtka at email@example.com