Canada Dollar Falls From Almost 3-Month High on Trade Gap

Canada’s dollar fell from the strongest in three months versus its U.S peer as the nation’s trade deficit widened to the fourth-largest on record, suggesting the economy is struggling to emerge from an export-driven slump.

The currency gained earlier after China’s inflation quickened as its economy grew faster than projected. Canada recorded a C$1.96 billion ($2 billion) trade deficit in November, up from a revised C$552 million shortfall in October, Statistics Canada said in Ottawa. The median estimate in a Bloomberg survey of economists was for a C$600 million deficit. Crude oil, Canada’s biggest export, fell.

“The trade deficit absolutely worked to pare some of those gains,” Jack Spitz, managing director of foreign exchange at National Bank of Canada, said in a telephone interview. “Taking the Canadian number in the context of it being a mitigating factor with respect to first-quarter growth, that could play into the weakness.”

The loonie, as the Canadian dollar is nicknamed for the image of the aquatic bird on the C$1 coin, fell 0.2 percent to 98.48 cents per U.S. dollar at 5 p.m. in Toronto. Earlier, it touched 98.16 cents, the strongest level since Oct. 18. One Canadian dollar buys $1.0143. On the week, the loonie gained 0.2 percent.

Futures on crude oil, Canada’s biggest export, rose 0.6 percent this week to $93.73 per barrel in New York, and the Standard & Poor’s 500 Index rose 0.4 percent.

Government Bonds

Benchmark 10-year Canadian government bonds rose today, pushing yields down two basis points to end the week little changed at 1.94 percent. The price of the 2.75 percent note maturing in June 2022 fell 4 cents to C$106.92 this week.

The loonie’s move past Dec. 13’s high of 98.25 cents per U.S. dollar signals it may appreciate beyond 98 cents, according to a note from George Davis, chief technical analyst at RBC Capital Markets, a unit of Royal Bank of Canada.

The loonie’s gain against its U.S. counterpart trailed those of other commodity currencies, including the Australian dollar which saw a 0.6 percent increase.

“We’ve rallied a lot less, we’ve been a really low-beta mover this week,” Shane Enright, executive director at Canadian Imperial Bank of Commerce’s CIBC World Markets unit, said by phone from Toronto. “So Canada has been an underperformer for the last few days.” An asset with a high beta tends to rise and fall more than the overall market.

Past Month

The loonie fell 0.6 percent over the past month versus nine developed-nation peers tracked by Bloomberg Correlation-Weighted Indexes. The greenback has dropped 0.9 percent.

China’s consumer price index rose 2.5 percent in December from a year earlier to the highest level in seven months, compared to a 2 percent gain in November, the National Bureau of Statistics said today in Beijing. The nation’s economy probably grew 7.7 percent in 2012, exceeding the government target of 7.5 percent, a vice chairman at China’s economic planning agency said.

The loonie rose the most in a week yesterday against its U.S. counterpart, 0.5 percent, after Chinese exports topped estimates, increasing 14.1 percent in December from a year earlier, almost triple the 5 percent gain forecast in a Bloomberg analyst survey.

The U.S., Canada’s biggest trade partner, posted its largest trade deficit today since April. The gap unexpectedly widened 15.8 percent to $48.7 billion, Commerce Department figures showed today in Washington. The median forecast in a Bloomberg survey of economists projected a narrowing to $41.3 billion. Demand for consumer goods made overseas surged to a record.

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