Canadian Dollar Trades at Almost 1-Month Low Before G-20 MeetingCecile Gutscher
The Canadian dollar traded at almost a one-month low before a Group of 20 meeting that may offer clues about measures by central banks to jump-start economic growth.
The loonie, as the currency is nicknamed, was little changed against its U.S. counterpart after paring gains earlier today. The G-20 finance ministers and central bankers meet for two days in Washington beginning today, before weekend talks at the International Monetary Fund and World Bank. A draft statement prepared for the group’s meeting maintains a February pledge to “move more rapidly toward more market-determined exchange rate systems and exchange-rate flexibility,” Bloomberg BNA reported.
“The market certainly wants to see what the G-20 brings and how aggressive the tone will be to foreign-exchange rates,” Dean Popplewell, head analyst in Toronto at the online-currency-trading company Oanda Corp., said in a phone interview. “Central banks are looking for positive growth and sustainable growth. At the moment, there’s not a global conviction in the trend.”
The Canadian dollar was little changed at C$1.0264 per U.S. dollar at 5 p.m. in Toronto, after rising earlier to C$1.0230. It reached C$1.0294 yesterday, the lowest level since March 13. One loonie buys 97.43 U.S. cents.
George Davis, chief technical analyst in Toronto at Royal Bank of Canada’s RBC Capital Markets unit, advised clients to sell the Canadian dollar at levels weaker than C$1.0285.
“An hourly close above this level would pave the way for further gains toward C$1.0315, with a further rally exposing resistance in the C$1.0340 area,” Davis said in a research note. “Place a tight stop below C$1.0192 on an hourly closing basis.” A stop is an order set to be executed when an asset reaches a predetermined price.
Trading in the loonie suggests it won’t reach parity with its U.S. counterpart in the near-term, last attained on Feb. 7, Oanda’s Popplewell said.
“The Canadian dollar will struggle to make its way towards parity,” he said. “Commodities are still under pressure --that will always be a worry for the Canadian dollar.”
Crude oil, the nation’s largest export, rose 1.9 percent to $88.34 a barrel in New York, paring a 10 percent loss this month. The Standard & Poor’s 500 Index fell 0.7 percent while the S&P/TSX Composite Index, the benchmark Canadian equity gauge, added 0.4 percent.
Canada’s benchmark 10-year government bonds rose, with yields falling one basis point, or 0.01 percentage point, to 1.70 percent. The 1.5 percent security maturing in June 2023 added 7 cents to C$98.13.
The Bank of Canada announced plans to sell C$3.3 billion ($3.2 billion) of two-year notes on April 24. The 1.5 percent securities will mature in August 2015.
Ten-year yields dropped yesterday to as low as 1.69 percent, the least since December, after Bank of Canada Governor Mark Carney also reduced his growth forecast for the year.
Derivatives point to four basis points of easing by the central bank’s final meeting of the year, according to Bloomberg calculations based on trading in overnight-index swaps. As recently as January, the median forecast by economists called for a quarter-percentage point increase at the end of the year.
One day after the Bank of Canada held its policy interest rate at 1 percent, Carney said the nation’s housing market is moving in the right direction. The central bank’s policy report yesterday forecast household debt levels would stabilize.
“We have conducted monetary policy in, we think, a pretty transparent way,” Carney said in Washington, where he is meeting with G-20 leaders. Interest rates “could be higher sooner if this isn’t addressed or this isn’t adjusted in a more timely way.”
The Bank yesterday reduced its outlook for growth this year to 1.5 percent from 2 percent because of lower business investment and government spending, and projected excess capacity in the economy at least into 2015.
The Canadian dollar has fallen 0.8 percent this year against nine other developed nation currencies tracked by the Bloomberg Correlation-Weighted Index. The U.S. dollar rose 3 percent.