Canadian Dollar Gains Versus Most Peers as Building Permits Rise

The Canadian dollar strengthened against almost all of its most-traded counterparts after a government report showed March building permits increased more than forecast.

The currency rose against peers from commodity exporting nations such as Australia and New Zealand as the value of permits issued by municipalities climbed 8.6 percent to C$6.45 billion ($6.40 billion), following a revised 1.5 percent increase in February, Statistics Canada said in Ottawa. The increase outstripped all 12 responses in a Bloomberg economist survey with a median estimate of a 1.3 percent rise. Canada posted its first international merchandise trade surplus in a year in March, and February gross domestic product growth was 0.3 percent compared to a media forecast of 0.2 percent.

“Some of the data is coming out a little bit better than expected,” Matthew Perrier, director of foreign exchange at Bank of Montreal, said by phone from Toronto. “Canada’s doing a little bit better -- when it weakened off in the middle part of last month, it didn’t weaken off quite as far as it did in March. The weakness is a little shallower with each move so that seems to be trending in Canada’s favor.”

The loonie, as the Canadian dollar in known for the image of the aquatic bird on the C$1 coin, rose 0.1 percent to C$1.0068 per U.S. dollar at 5:00 p.m. in Toronto. One loonie buys 99.33 U.S. cents. The Canadian dollar has risen the last two months.

Bonds, Oil

Canada’s 10-year government bonds fell, with yields rising three basis points, or 0.03 percentage point, to 1.80 percent. The 1.5 percent security maturing in June 2023 declined 28 cents to C$97.27.

Futures on crude oil, Canada’s biggest export, gained 0.2 percent to $95.79 per barrel. The Standard & Poor’s 500 Index of U.S. stocks added 0.2 percent.

The cost to insure against losses in the Canadian dollar versus its U.S. counterpart reached their highest point in more than a week. The three-month so-called 25-delta risk reversal rate touched 1.1275 percent, its highest point since April 25. Risk reversals measure the premium on options contracts to sell Canadian dollars versus buying U.S. contracts that do the opposite.

The increase in building permits was led by a 19 percent gain in non-residential construction while residential permits gained 1.7 percent, with a 4.7 percent drop in single family housing permits, Statistics Canada said. Finance minister Jim Flaherty tightened mortgage rules last summer to deflate a potential housing bubble.

‘Soft Numbers’

“We saw increased building permits in March, but we still have weakness on the housing side,” said Dean Popplewell, head analyst at the online currency trading firm Oanda Corp., by phone from Toronto. “These soft numbers are not really too much of a surprise given the change in the mortgage rules and obviously economic moderation that we’re seeing globally and obviously slowing home prices as well. Put that all together and there’s nothing to get too excited about.”

The loonie is approaching a technical measure that suggests it will soon fall in value. The 14-day relative strength index against the U.S. dollar was 63.7 percent, at almost the 70 percent level that signals it will drop.

Canada’s Ivey purchasing managers’ index was 52.2 in April on a seasonally adjusted basis, following a March reading of 61.6, according to a statement on the website of Western University’s business school.

Readings of more than 50 indicate purchasing by governments and companies advanced.

The U.S. jobless rate reached 7.5 percent in April, its lowest point in four years, Labor Department figures showed last week.

The loonie has gained 1.4 percent in the last month against nine developed nation currencies tracked by the Bloomberg Correlation Weighted Index. The Australian dollar has fallen 1.4 percent while the greenback has gained 0.2 percent.

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