Canada Dollar Falls From 1-Week High as Crude Oil SlidesAri Altstedter
Canada’s dollar declined from the strongest level in more than a week versus its U.S. counterpart as crude oil, the nation’s biggest export, dropped amid ebbing risk appetite.
The currency fell for the first time in three days as the slide in oil compounded a price discount for Canada’s product from a lack of pipeline capacity for bringing the commodity to international waters. Other commodities and stocks slid as political turmoil in Europe fueled concern the area’s debt crisis will worsen.
“Lower oil and lower stocks are not good for the Canadian dollar,” Greg Moore, currency strategist at Toronto-Dominion Bank, said by phone from Toronto. “There are some negative stories that are starting to gain a little bit more traction.”
The loonie, as the Canadian dollar is known for the image of the aquatic bird on the C$1, depreciated 0.2 percent to 99.88 cents per U.S. dollar at 5 p.m. in Toronto. It touched 99.48 cents earlier, its strongest level since Jan. 23. One Canadian dollar buys $1.0012.
Canada’s benchmark 10-year bonds climbed, pushing yields down five basis points, or 0.05 percentage point, to 1.99 percent. The price of the 2.75 percent security maturing in June 2022 increased 45 cents to C$106.47.
The Standard & Poor’s 500 Index lost 1.2 percent, and S&P’s GSCI Index of 24 commodities declined 0.8 percent. Raw materials including oil account for about half of Canada’s export revenue.
Crude oil for March delivery sank 1.7 percent to $96.13 a barrel in New York and fell as much as 1.9 percent, the biggest intraday drop since Dec. 21, to $95.89. Futures touched $98.24 on Jan. 30, the highest level since September.
The price for heavy crude from the landlocked province of Alberta has climbed over the past two months relative to international benchmarks. The discount on Western Canada Select oil to the U.S. benchmark West Texas Intermediate was $30.50 per barrel today, compared with $36 on Jan. 24 and $7.25 on Sept. 18, 2012.
“The big underlying story in the Canadian economy is that Alberta, the engine of growth for the last while, is in a situation where they’re having trouble making money off its natural gas, and they’re having trouble making money off their crude oil,” Aaron Fennell, a futures specialist at Bank of Nova Scotia’s ScotiaMcLeod unit, said by phone from Toronto. “If they’re not getting the price on it, they’re losing money, they start shutting down production, that has significant impact on our export numbers.”
Canada’s currency remained lower as a report showed factory orders in the U.S., the nation’s biggest trade partner, increased less than forecast in December. Bookings rose 1.8 percent after a revised 0.3 percent drop in November that was initially reported as unchanged, figures from the Commerce Department showed today in Washington. A Bloomberg survey forecast a 2.3 percent gain.
The loonie advanced 0.7 percent versus the euro to C$1.3498 and touched C$1.3485, the strongest level since Jan. 25, amid political discord in Italy and Spain.
Spanish Premier Mariano Rajoy, facing opposition calls to resign amid contested reports about illegal payments, met in Berlin with German Chancellor Angela Merkel. She expressed confidence in his ability to stem the debt crisis.
In Italy, a poll showed former prime minister Silvio Berlusconi narrowed the frontrunner’s lead in elections later this month. Berlusconi was pressured to resign in 2011 as soaring bond yields threatened the country’s ability to avoid defaulting on its debts.
German bond yields fell as investors sought safety, while Italian and Spanish yields rose. The yield gap between Spanish and German 10-year notes widened to 3.83 percentage points, the most in more than a month.
“You add those two countries together and you’re certainly seeing a fair amount of spread movement,” Dean Popplewell, head analyst at the online currency-trading firm Oanda Corp., said by phone from Toronto of Italy and Spain. “Obviously there’s a few unsettling issues occurring right now in the European periphery.”
Options traders were the least bearish on the loonie in a week, with the three month 25-delta risk reversal rate touching 0.918 percentage point, the least since Jan. 24. The rate shows the premium charged for the right to buy the U.S. dollar versus contracts to sell.
The Canadian dollar has lost 1 percent this year among the 10 developed-nation currencies monitored by the Bloomberg Correlation-Weighted Indexes. The U.S. currency has fallen 0.3 percent, while the euro has gained 2.5 percent.